The first non-wordplay argument that Rick presents is the comparative valuations for UPS, FedEx, and Airborne Freight. It is true, as Rick points out, that looking at these companies (which occupy similar if not perfectly overlapping segments of the package-delivery market) on price-to-earnings-to-growth metrics produces a certain confusion.
The possible answers for why the market values these similar-looking companies so differently are three: 1) UPS is valued too high, 2) the others are valued too low, or 3) there are reasons why the companies aren't really that similar in the first place. Rick suggests the first as the correct answer.
Let's toss Airborne Freight out of the equation here. The company seems to be losing market share to its competitors, and is the only one of the three that has earnings that are going in the wrong direction. Airborne's expected earnings for 1999 are at -27% in comparison to 1998. 2000 looks to (perhaps) regain about half of that loss. You can call that expected growth of about 9% as Rick and the community of Wall Street analysts do, or you can call that negative growth as the market obviously does. So there clearly is something different about Airborne that doesn't in any way help us understand UPS's valuation.
As to FedEx, that's a tougher comparison. FedEx got taken out back behind the woodshed earlier this year for missing estimates (after they had already been reduced), so there's obviously a bit of residual doubt about FedEx's ability to perform and accurately meet its objectives. UPS has no such black mark on its transcript, perhaps in part due to its limited history in the public markets. At the very least, one of the conclusions that can be arrived at from a purely numbers perspective is that FedEx is getting disrespected at the moment by the market. It earned that disrespect by failing to convert, but nevertheless, it fails as a proper comparative company to UPS on a valuation standpoint because of its momentarily unique circumstances. Should UPS fail to deliver on earnings the way FedEx has, well, yes, it will lose quite a few dollars from its market capitalization. But since it hasn't done so, the comparison is a red herring.
Second, Rick offers up as mysterious the fact that UPS has not suffered the same fate as Toys "R" Us for the debacle of failing to timely deliver its Christmas goods. Are others besides me perplexed by this line of attack? The reason that UPS hasn't suffered is that it wasn't UPS's fault that Toys "R" Us had no toys to deliver. Rick's hope that the market would not grasp this distinction of only punishing the company who dropped the ball rings hollow to me. It seems the stroke of someone grasping for solid arguments to hurl against a company whose execution of its business, rightly, goes unquestioned today by the market.
It's arguments like these that finally help me understand why Rick uses his opening joke. It seems like it's actually his best material here.
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