He highlights the growing margins, knowing full well that it has been a product of many different things, such as a booming economy, low prices at the pump, and ankle-high interest and inflation rates. The cyclical tide is shifting on all these fronts. He almost expects you to stumble across those well-placed bread crumbs.
In the end, Bill's argument is a lot like that delayed Toys "R" Us order. It's nicely packaged. It's also obsolete now that the festivities have moved on.
He can try to sell you on the promise of domestic and international market share potential, but the reality is that FedEx is now the hungry one. Overseas, it's an entirely different delivery landscape that will always favor the natives. There's more red tape in the process than Bill was using in making a frilly bow for his bullish case. For more perspective, here is UPS Airlines' President Tom Weidemeyer:
"We still have a problem with sky-high tariffs, with labor laws that hamper efficiency, with limitations on foreign investment, and with customs procedures that make just-in-time operations nearly impossible to achieve."
Tack on strict regulations for competition and rudimentary-yet-expensive telephone service and you will realize that global domination is simply not realistic. Not now. Maybe not later.
That leaves a slow-growing, multibillion-dollar company whose share price has made promises that its fundamentals can't keep. Bill seems to think that a company growing sales at a single-digit clip can continue to grow earnings at a double-digit rate. I think he is misjudging the elasticity of the rubber band here. Margins can't grow forever. I think he is also misjudging the viciousness of that rubberband when it snaps back into place.
Will that have an impact on UPS the company? Probably not. Great company. Will that have an impact on UPS the stock? Probably so. Not-so-great stock.
This Week's Duel
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