P2 Adds More UTI Worldwide Shares

Expeditors International of Washington (NASDAQ:EXPD) is the company’s closest peer. It is significantly larger in terms of market capitalization, with a market cap above $8 billion, and also seems pricy in terms of its recent performance: it carries trailing and forward P/Es of 24 and 21, respectively. In the third quarter of 2012, revenue was down 5% from the third quarter of 2011 and this contributed to pulling earnings down 17%. As with UTI, the company would have to reverse its poor performance and start doing very well in order to be a good buy, and we’re not confident that it will do so.

Of course an investor looking at UTi Worldwide Inc. could also consider FedEx Corporation (NYSE:FDX) and United Parcel Service, Inc. (NYSE:UPS) to be alternatives. FedEx in particular seems quite competitive in value terms: its trailing P/E multiple is only 14, and its business was about flat in its most recent quarter compared to the same period in the previous year. It would require some growth to justify its valuation, but it’s hard to see a scenario where it is a worse buy than UTI or Expeditors International. Even in terms of EBITDA- FedEx’s EV/EBITDA multiple is 5.2x, easily lower than where the two companies we’ve previously discussed are valued- it seems like at least a moderately interesting value prospect. UPS, as something of the market leader in delivery, freight, and logistics services, carries a bit of a premium to FedEx at 22 times trailing earnings, placing it more in the same neighborhood as UTI or Expeditors International. Its net income has also been down strongly, but we feel that it’s at least a safer pick due to its market position.

It’s possible that P2 is buying up a large stake in the company because it has plans to shake up management, corporate strategy, or some other element of UTI’s business that will increase profits. However, at the moment FedEx seems like a better buy.