Short Trading Opportunity

Federal Express and UPS

In view of the slowdown in both the domestic and international economics, we consider the stocks of Federal Express (FDX $50.20) and UPS International (UPS $57.37) to be overpriced and consequently suggest that these stocks are short sale recommendations.

The reasons for our negative posture are as follows:

• The current slowdown has impacted delivery volume at both companies, which have recently acknowledged that their earnings outlook is lower than generally anticipated.
• Earlier this month UPS announced that it would lay-off 100 pilots due to a slowdown in package volume.
• Further exacerbated both Federal Express and UPS is the substantially higher cost of jet fuel which normally represents about 15%-20% of operating costs.
• While both stocks have declined recently, we believe that current earnings estimates could be lower than expected. This potential negative surprise will most likely result in further price declines in the stocks.
• Although oil prices could decline in the near future, jet fuel prices will not drop sufficiently to have a materially beneficial impact on earnings.
• Technically speaking if FDX drops below $50.00 per share our target price of $45 could easily be achieved.

Stock Traders Press Management