Holiday Cheer Boosts Shippers

The types of items holiday shoppers have been scooping up could bode well for FedEx and UPS.

"They deliver higher-value, lower-density goods like computers, CDs and jewelry," said Donald Broughton, an analyst with A.G. Edwards. "If you look at the holiday sales statistics so far, it appears this holiday is going to be strong, but the stronger spending won't necessarily be reflected at Wal-Mart or Kmart (KMRT Quote). It appears it will be reflected at Dell (DELL Quote), Tiffany (TIF Quote) and Amazon.com (AMZN Quote). If that's the case, UPS and FedEx should do very well." (A.G. Edwards or an affiliate received non-investment-banking compensation from UPS over the past 12 months. It did not receive compensation from FedEx during that time.)

Shareholders won't get a look at UPS' holiday financial performance until January, when it releases results for the quarter ending Dec. 31. In mid-December, however, FedEx will report its second quarter, which ended Nov. 30, and that could provide an early glimpse of holiday trends, according to Broughton. In addition to reflecting online purchases early in the holiday season, the company's numbers will include the shipping FedEx did ahead of the holidays for manufacturers such as Dell with just-in-time inventory practices.

"You think of the last-minute item that gets shipped, but that's the last link in the supply chain," Broughton said. "If I buy a Dell computer to be delivered to my house as a gift for my kid, sure, FedEx may make that last-leg move on Dec.13, but all of the pieces that went into the computer all got moved in October and November."

The consensus Wall Street analyst estimate is for FedEx to earn $1.27 a share on $7.03 billion in revenue, according to Thomson First Call.

Even though the holiday season should prove strong for the two shippers, analysts said their share prices likely account for that expectation.

Ship Shape UPS and FedEx Drive Ahead

Source: BigCharts.com