FedEx Corporation (FDX): A Bargain in the Delivery Business

United Parcel Service, Inc. (NYSE:UPS) trades for just over 17 times the current fiscal year’s projected earnings, which is comparable to FedEx. However, the company is projected to grow at around 12% annually. That’s still very good — just not quite as good as FedEx, mostly as a result of FedEx’s much more aggressive cost-saving initiatives.

That said, it’s worth considering United Parcel Service, Inc. (NYSE:UPS)’s dividend yield of almost 3%, which is sure to lure some income-seeking investors away from FedEx Corporation (NYSE:FDX).

For those who would prefer a smaller shipping company, take a look at C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW). About one-fifth of the size of the other two companies mentioned, C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) is one of the larger third-party logistics companies in the U.S. The company has transportation contracts with about 56,000 companies including railroads, motor carriers, and air freight carriers.

At 19.5 times its current-year earnings, C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) is the most highly valued of the three; however shares are appealing at their current levels. The company pays a dividend of 2.3%, has zero debt, and is projected to grow its earnings by over 13% annually going forward.

Conclusion

While there certainly are some viable alternatives, I still like FedEx Corporation (NYSE:FDX) in the delivery and shipping sector. The kind of earnings growth that it has projected is both outstanding and achievable, if the company’s recent results are any indication. Assuming a P/E ratio of 16.5, which is actually lower than FedEx’s historical average, this could easily become a $150 stock in two years, if the company meets the projections. After the recent pullback, now may be an excellent opportunity to get in on one of the few remaining bargains in the current bull market.

The article A Bargain in the Delivery Business originally appeared on Fool.com and is written by Matthew Frankel.

Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends FedEx and United Parcel Service. Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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