FedEx and UPS: The ultimate barometers

The old joke was that if you ever want to know the state of the US economy, just ask a New York City taxi driver. They were always blunt and hey, being New Yorkers, not shy. Well, the new barometer of the US economy is to talk to the drivers of UPS and FedEx trucks. These people see it all first.

FedEx Corp. (NYSE: FDX) and United Parcel Service (NYSE: UPS) combined have a market capitalization of $110 billion and will generate combined revenues of over $85 billion in 2007. They deliver the packages and parcels for consumers and businesses, overnight and on-time. Both have experienced very robust times with an especially successful Christmas season behind them.

The biggest competition these two face besides each other is the United States Postal Service. UPS and FDX dominate the non-government side of the delivery business. UPS has also entered the retail side of the delivery world with its acquisition of Mailboxes, Inc. a few years back. They understood that capturing the retail customer through a series of conveniences was the way to go.

Not to be outdone, FedEx bought the retail service business Kinko's. The logic for both UPS and FDX was if they captured a satisfied consumer base, the business sector base would follow. The reasoning I heard from several UPS mid-level employees was simply put to me, "because consumers run businesses too." Elegantly said.

The first quarter is normally the slowest period of the calender year for these two as employees and clients recover from the December madness. The good news is both companies have given strong guidance for 2007 revenues and earnings, both seeing north of 10% growth for revenues and earnings.

That is a comforting sign for the US economy because the people who transport and deliver the merchandise are the first to see a slow down -- if there is one.

Georges Yared is the author of recently released books Stop Losing Money Today and Baby Boomer Investing . . . Where do we go from here?