UPS vs FedEx

[Echopapa]

I thought this was an interesting article contrasting the two companies. Any thoughts?

Associated Press
UPS, FedEx Give Contrasting Outlooks
Wednesday January 12, 5:10 pm ET
By Harry R. Weber, AP Business Writer

Contrasting Quarterly Outlooks From UPS and FedEx Are a Factor of Competition, Analysts Say


ATLANTA (AP) -- FedEx Corp.'s strength in next-day air deliveries and improvements in its ground business helped it post a more positive outlook for the quarter that includes the holiday shipping season than larger rival UPS Inc., analysts say.

Atlanta-based UPS warned Tuesday that its fourth-quarter earnings would fall short of previous estimates because of higher operating costs and weaker than expected domestic package volume from Christmas to New Year's Day. FedEx, based in Memphis, Tenn., issued a statement saying its business remained strong over the holidays and it would meet its earnings goals.

"They're tough competitors; one may be benefiting at the other's expense," Arthur Hatfield, an analyst with Morgan, Keegan & Company Inc. in Memphis, said Wednesday.

UPS shares fell $6.12, or 7.4 percent, to close at $77.18 in trading Wednesday on the New York Stock Exchange. FedEx shares were also down, but the decline was not so sharp -- it lost 94 cents to close at $94.47 on the NYSE.

Hatfield said it appears there was a shift in the last couple of weeks before Christmas from ground shipments to next-day air deliveries that may have benefited FedEx. A larger percentage of FedEx's overall revenue comes from next-day air deliveries compared to UPS.

While a larger percentage of UPS' overall revenue comes from ground deliveries compared to FedEx, FedEx has been making inroads there as well, said Donald Broughton, an analyst with A.G. Edwards & Sons Inc. in St. Louis.

"I think it's the ongoing success of FedEx ground in stealing market share from UPS ground," Broughton said.

Hatfield said another reason for the contrasting outlooks could also be a matter of timing. He noted that the peak of holiday shipping is in December, which is the beginning of FedEx's third-quarter. December, however, is the end of UPS' fourth-quarter. If there is slowness in the industry during that period, FedEx would be able to make up for it later in its third quarter, while UPS, for its fourth quarter at least, would not be able to do that.

Steve Riepenhoff, vice president of logistics and retailing at Kurt Salmon Associates, a retail consulting company, believes that the popularity of gift cards could have played a factor in a drop-off of UPS' post-holiday business. An increasing number of consumers getting gift cards as holiday gifts means there will be less returning of items. Riepenhoff noted that two of his retail clients have reported a decline in post-holiday returns from a year ago. Both have seen gift card sales increase 10 percent.

In its revised outlook, UPS said that excluding a one-time tax benefit, it expects to report earnings per share of 75 cents to 76 cents for the October-December period. Its previous estimate on that basis was for earnings per share of 83 cents to 87 cents.

Analysts surveyed by Thomson First Call were expecting earnings of 85 cents per share, excluding one-time items. UPS cited a significant drop in U.S. domestic volume during the period from Christmas to New Year's Day and higher operating costs due to the severe weather that struck the midwestern United States during the height of its peak season operations.

Despite fourth quarter 2004 results, UPS reaffirmed its outlook for 2005. The company expects earnings will increase 13 percent to 17 percent in 2005. UPS reports its fourth-quarter and year-end results on Jan. 27.

FedEx, meanwhile, reaffirmed Tuesday its previous third-quarter guidance of 90 cents to $1 a share. The company said it experienced a strong holiday season and continues to expect favorable U.S. and global economic conditions, with strong demand for all of its transportation services. Analysts surveyed by Thomson First Call expect FedEx to report earnings of 97 cents a share for the quarter ending Feb. 28. AP Business Writer Anne D'Innocenzio in New York contributed to this report.

 

[Los1]

Hey EP-

Got lucky, didnt we?!!
Los1

 

[Wise Guy]

Hey EP, Looks like Big Brown is in danger of being put outta 'bidness. I'd still rather live in Looneyville though. Come visit, you know who.

 

[Big Beer Belly]

Wonder What This Will Do To FedEx's Bottom Line?

Disgruntled drivers deliver trouble to FedEx

By Monica Langley
The Wall Street Journal
Posted January 9 2005



**CENSORED**MADISON, Tenn. · As a driver for FedEx Corp.'s ground division, Brion Butterbaugh must wear a full FedEx uniform, observe a long list of delivery and pick-up times and hook his truck keys on the finger FedEx tells him to when walking to doors to deliver packages (the little finger of the nonwriting hand).

Butterbaugh, 41 years old, isn't a FedEx employee. He's one of 13,500 contract drivers for FedEx Ground who operate their own trucks and pay for their gas and other expenses. The company says these drivers are independent and has advertised that becoming a contractor is a way to "be your own boss."

But some contractors have set off a high-stakes battle with FedEx by contending the company calls all the shots in their operations. They say rules such as the little-finger requirement show they're essentially employees of FedEx, with all of the risks and none of the benefits, such as health insurance and a retirement plan.

Last July, FedEx Ground drivers who had filed a class-action lawsuit against the company won a victory when a California state court ruled that they are employees because of FedEx's "close to absolute actual control" over drivers.

In recent months, officials in Montana and New Jersey likewise determined that certain FedEx Ground drivers in those states are employees. FedEx is appealing all the judgments, and FedEx Ground Chief Executive Daniel J. Sullivan says he's confident the company will prevail.

The Internal Revenue Service is also investigating FedEx's driver classification, prompted by driver complaints, according to people familiar with the situation. The tax agency will examine whether FedEx has "pushed the envelope of control so far" that it's no longer in compliance with an earlier agreement under which its predecessor company was permitted to count drivers as independent contractors, according to one knowledgeable person. An IRS spokesman declined to comment. FedEx isn't aware of any IRS probe, Sullivan said.

Sullivan says malcontents represent only a "very small number" of FedEx contractors. "We truly have independent contractors," he says. He notes that drivers can sell their routes, don't have specific start and finish times, and take on the risk that their truck will break down or get damaged. If FedEx reclassified contract drivers as employees and treated them as such, "ninety-nine percent would want to hang me," he says.

The issue has become potentially serious for FedEx over the past year as it battles United Parcel Service Inc. in the fast-growing parcel-delivery business. In its quarterly report to securities regulators last month, FedEx disclosed the proceedings over FedEx Ground's "owner-operators" for the first time and warned that they could "result in employment and withholding tax liability for FedEx Ground." It said it couldn't estimate the size of the potential liability.

U.S. companies have long sought to get an edge by treating workers as independent contractors instead of employees. Employees receive benefits such as health care, paid vacations and pensions. And the law requires companies to pay 6.2 percent of the first $90,000 of an employee's salary in 2005 for Social Security taxes as well as 1.45 percent of all salary for Medicare taxes.

From coal miners in the 1940s to Microsoft Corp. programmers in the 1990s, hired hands seeking to be classified as employees have clashed with companies. The IRS has estimated that in 2001 "sole proprietors" -- people such as the contract drivers who report their business income on their personal tax returns -- failed to pay $81 billion in taxes they owed. The Government Accountability Office, the investigative arm of Congress, has estimated that 38 percent of employers examined by the IRS have misclassified workers as independent contractors.

FedEx, which originally focused on shipping packages by air, got into the ground-delivery business in 1998 to compete directly with UPS. It acquired a ground-delivery company, Caliber System Inc., that had fended off a string of challenges, including one from the IRS, seeking to designate its drivers as contractors.

The challenges over workers' status come as FedEx Ground's business is benefiting from the rebounding economy. FedEx Ground revenue grew to $3.9 billion for the fiscal year ended May 31, 2004, from $2.9 billion two years earlier.

Including FedEx Ground, FedEx has around 15,000 independent-contractor drivers and about 60,000 employee drivers, most of them delivering packages shipped by air. Contract drivers give FedEx "a distinct advantage over UPS," says Donald Broughton, a research analyst at A.G. Edwards & Sons Inc. "Besides saving on capital outlay, FedEx benefits from drivers who are motivated to make that extra stop, to deliver that extra package for extra pay."

Luis Espinoza of Santa Cruz, Calif., says becoming a FedEx Ground contractor was a good outlet for his entrepreneurial drive. Espinoza worked odd jobs at minimum wage for a construction company until he signed up to drive for FedEx Ground. With a $5,000 investment and $700 monthly rental of a van, he started a route and now has three routes. He says he earns about $90,000 a year on revenue of $200,000.

Some current and former FedEx Ground drivers offer another view. These drivers say FedEx terminal managers set rules for nearly every facet of their work. "I have to obey or I'm gone," says William Beattie of Mentor, Ohio, a driver for 15 years. "I can name only one business decision I'm allowed to make without FedEx approval -- where to get my gas."

 

[Propsync]

I doubt very much, for now. I've been with ground for years, back when it was Roadway. Back when the company started in the 80's, Roadway didn't have the money to drop on a fleet of trucks. It was easier to hire 'contractors' who buy their own trucks, semi drivers included. They would pay a little better than UPS and you hope your truck doesn't break down a lot. And they expect you to work a bit harder. Most of the gripes come from people that don't want to work hard. The ones who really want it do VERY well. I know of a couple of guys that have 4-5 trucks and all they do is cover for their drivers on vacation. You have to be doing well to afford that. It would be hard for FedEx to buy all of that equipment back and make the contractors employees, and FedEx would fight it all the way.

 

[klhoard]

Aren't our pilots also independent contractors??