FedEx, the second largest US package delivery company behind UPS, would be the preferred option in times of faster economic growth, but if the outlook is tempered, UPS should outperform, Credit Suisse analyst Christopher Ceraso said in a note.
The analyst, who raised his rating on UPS stock, said UPS generates significantly more free cash flow and has a stronger balance sheet than FedEx, giving it an edge over its smaller peer while economic growth stays sluggish.
Gross Domestic Product growth in the US will stay at 2 percent for the next several quarters and global industrial production may not exhibit the kind of pronounced rebound that was expected, analyst Ceraso said.
Shares of UPS have consistently outperformed Fedex during periods of slowing growth, when GDP is in the 2 percent range, Ceraso said.
FedEx’s stock was down 3 percent at $75.61, while that of UPS was down 1 percent at $65.95 on Friday on the New York Stock Exchange. The Dow Jones Industrial Average Index was down 1.48 percent.
