Two of these shipping services that have seen huge demand are FedEx Corporation (NYSE:FDX) and United Parcel Service, Inc. (NYSE:UPS). Both of these companies seem to be better choices for getting packages to consumers quicker than the USPS. The downside is that they charge more, and even though you get an estimated delivery date it is not always accurate.
UPS is struggling
The world economy is currently sluggish, despite the Dow Jones Average continuing to climb to new highs, and UPS has stated that 2013 will be a slow year due to economic uncertainty. United Parcel Service, Inc. (NYSE:UPS) has lowered its 2013 earnings guidance between to $4.80 to $5.06 per share. While still good in a sluggish economy, that doesn’t compare well with Wall Street analysts’ predictions. The analysts predicted full year 2013 guidance of $5.16 per share.
One thing to note is that these shipping services companies act as a gauge for the economy. With United Parcel Service, Inc. (NYSE:UPS) lowering its guidance it seems that growth will either be stagnant, or drift down towards the end of this year. UPS also struggled in another way when it tried to acquire TNT Express, a European shipping service. As we have come to find out this deal collapsed because Europe anti-trust regulators said they would veto the deal no matter what.
UPS reported earnings on April 25, 2013 that beat analysts expectations on earnings per share, but revenue came in light. The EPS came in at $1.08 per share, with revenue of $13.43 billion. The EPS estimate by analysts was for $1.04 per share on revenue of $13.46 billion. So what caused the downturn in revenues? As mentioned before, United Parcel Service, Inc. (NYSE:UPS) sees a sluggish economy in the coming months, and it will show on their next quarter earnings report. The earnings by United Parcel Service, Inc. (NYSE:UPS) were not the best, but at the same time at least the economy didn’t hurt them too badly on the top line. The economy may rebound in the coming months, and the company may boost its guidance in the future.
FedEx with its problems
Unlike UPS, FedEx Corporation (NYSE:FDX) relies on revenues coming from the international markets. So when it came to earnings, FedEx should have expected that their earnings were going to slow down significantly. One contributing factor for the weakness was that customers chose to go with less expensive shipping methods, and that hurt FedEx Corporation (NYSE:FDX) with its revenue for the quarter.
FedEx says that it has decided to cut back on its Asian exposure, and will concentrate on changing the way it handles its low yielding shipping traffic. One good advantage that FedEx Corporation (NYSE:FDX) has over UPS is that FedEx had won a seven year contract with the USPS, which is estimated to be worth around $10 billion.
The economy in possible rebound mode
The stock market has continued its upward trend, but the economy may recover soon. I don’t see monetary easing stopping anytime soon; after all, even the international markets are doing their own quantitative easing these days.
The economy has seen some recovery, so there may be hope yet for both United Parcel Service, Inc. (NYSE:UPS) and FedEx Corporation (NYSE:FDX). One company that can improve on an economic rebound is Lennar Corporation (NYSE:LEN), which surged on good earnings. The surge that Lennar Corporation (NYSE:LEN) saw was on the back of the highest increase in revenue since back in 2007. The company reported $0.26 per share on revenue of $989.9 million, compared to analysts only expecting earnings per share of $0.15 on revenue of $898 million. The company has seen its stock jump up over 242.38% over the last 5 years.
Lennar Corporation (NYSE:LEN) has a market cap of $6.8 billion, and if the economy continues to show signs of recovery then the company will continue its upward trajectory. That said, Lennar has been doing so well in this economy that they claimed that its net income tripled in the first quarter.
Final thought
Both UPS and FedEx Corporation (NYSE:FDX) may deliver investors profits if the economy continues to show signs of rebound over the next few months. If you’re a long term investor at heart, these stocks can deliver profits for years to come.
The article Can These Stocks Deliver profits? originally appeared on Fool.com and is written by Terry Chrisomalis.
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