Better act fast before you miss those Black Friday deals.
Wait… isn’t Black Friday still a month away?
Yep. One month from tomorrow.
But in the world of advertising and marketing, Black Friday deals started appearing in July this year.
It won’t be long before we celebrate Independence Day with Black Friday deals. Independence Friday doesn’t have quite the same ring to it, does it?
Black Friday isn’t just a day anymore. It’s a season… and an ever lengthening one at that.
It seems to work. We consumers plan to spend more this year for the winter holidays than last year. According to the National Retail Federation’s latest survey, consumers expect to spend an average of $875 on gifts, decorations, food, and other items. That’s about 5% higher than 2022 and in line with the five-year average.
What’s more, nearly 60% of folks plan to shop online. And why not? It’s easy. You get good deals. And you don’t have to fight for parking spaces or sprint for that last popular item sitting on the shelf before someone else snags it.
That means gazillions of packages will be shipped these next few months. Not to mention the ugly sweaters that we send back.
To accommodate the crunch, UPS (UPS) is hiring more than 100,000 seasonal workers. FedEx (FDX) does something similar every year.
Amazon (AMZN) is testing a new system of robots and artificial intelligence to speed up shipping from its warehouses. If successful, it could mean even more packages flying out the door one after the other.
There’s got to be a way to make money on all this…
Quantum Rankings on the Big Shippers
Getting a package to your home or business from a distribution center is called “last mile delivery.” Makes sense, right?
The U.S. Post Office does that, of course, but it’s not publicly traded. The two biggest shipping companies everyone looks out their front door for are UPS and FedEx.
UPS (UPS) is easily the biggest of the two companies with a nearly $120 billion market cap. The company just reported last quarter’s results this morning, and the stock fell 6% today.
UPS beat earnings expectations but missed on sales. More importantly, management cut the full-year profit forecast due to a slowdown in global shipping, higher labor costs, and lower volume due to a potential strike for its workers. The strike was averted with a new agreement in September.
I would not have bought UPS right now anyway, and I still wouldn’t. Looking into my Quantum Edge system, UPS’s overall Quantum Score is well below the optimum buy range at 41.4.
Interestingly, its fundamentals score well at 75, but some of that is past strength when everybody bought everything online during the pandemic. Currently, sales are expected to fall more than 7% this year with earnings shrinking 38% before growing 11% next year.
The price chart and technicals are awful, resulting in an incredibly low Technical Score of 17.7. Shares are down more than 25% from their 52-week highs in April, and have set a series of 52-week lows the last couple months. It’s down 16% in the past year, way underperforming the S&P 500’s nearly 8% lift.
Practically all of my technical readings are negative. And in the world of investing, that can point to a stock that is oversold, meaning there could be a short-term bounce. And given that the market is also due for a bounce, I wouldn’t be surprised to see UPS bump higher at some point.
But it’s not a given, and it’s not a given the bounce would be big. There are better opportunities out there.
FedEx (FDX) operates on a different fiscal calendar and reported its earnings in September – and shares reacted the exact opposite, gaining 5% the next day.
Earnings increased 32%, beating forecasts, while revenue was just shy of expectations. But… FedEx raised its guidance.
It also has a much better – though still not great – Quantum Score of 60.3.
Ironically, FedEx scores lower fundamentally at 62.5. That’s in part because three-year growth isn’t as robust as UPS’s. But one-year earnings growth of 23% is much better, and analysts forecast almost 22% growth in the current fiscal year.
On the technicals side, FDX rates much higher at 58.8. That’s still not great because of the recent pullback, but it does illustrate the much stronger 50% gains over the past year.
And not surprisingly, Big Money has done more buying (green bars) than selling (1 red bar) over the past year.
FDX is a better candidate than UPS, but it still doesn’t rank among the strongest stocks fundamentally or technically. I’m not a buyer here.
These Shippers Rate Higher
I do see the kind of strength I look for in a different kind of shipping – so-called “LTL” shipping.
LTL stands for “less than truckload,” and its perfect for the e-commerce, just-in-time (JIT) markets of today. LTL shippers specialize in small loads or small quantities of freight.
For instance, a company that makes a product like soap might not want to wait until its wholesalers run out of inventory, so it ships out smaller batches to replenish supplies. LTL makes this efficient because the trucking company fills its trailers by combining lots of these small-batch orders from lots of shippers – a strategy known as “assembly service.”
For the soap producer, this is a lot cheaper than hiring an entire truck for a tiny restocking shipment, or risking the revenue hiccups that stem from supply-chain stockouts like what we saw during the pandemic.
The emergence of e-commerce has supercharged demand for LTL services in the $83 billion market.
The company I recommend in Quantum Edge Trader is rates much higher than FedEx or UPS with a Quantum Score of 70.7. That’s in the optimum buy zone anyway, but it’s especially impressive in this tough market of late.
The company’s fundamentals are superb with an 87.5 rating, thanks to solid earnings and sales growth, very little debt to speak of, and an attractive valuation, among other things.
Shares pulled back in the recent choppiness with everything else, which has lowered the technical rating to 58.8 – on par with FedEx. But that muscular fundamental rating makes it a good candidate to bounce faster and further when the market rallies.
These are the kinds of opportunities to look for right now – strong companies getting beaten down with everything else. It’s the best and fastest path to getting back to making money.
Jason Bodner’s Power Trends