For transporters, the cost of gas will be a 'driving' force in future profits and the ability to transport more commodities and less retail products will be beneficial. For that fact, we have decided to swap shares in UPS for a bigger focus on CSX. Both were favorites of the NetPayout Yield Portfolio for decent dividends and a history of buybacks.
Unfortunately for UPS whether public perception or reality, the cost of fuel will likely continue to hinder the amount of products shipped going forward. Even if it doesn't, its likely to hold the price of the stock down and competition with FedEx (FDX) and USPS is likely to hold down profit growth regardless. Not to mention that legal documents that used to be delivered via Express services will likely move to a sort of digital format reducing the need for UPS services because it can be done cheaper and is more economical and even greener.
Fortunately for CSX, the increasing cost of gas and likelihood that it will stay higher increases demand for the cheapest shipping method and most fuel efficient. Also, CSX greatly benefits from the demand for commodities such as coal, fertilizers, and ethanol. These goods can't exactly be shipped via a digital format. Railroads also face less competition and pricing power as new rails are almost impossible to get built.
In the end, its just a call that railroads have a better mix of products to ship and less costs from fuel. Either way, both CSX and UPS will move with the ultimate growth of the world markets, but we think CSX will move more.
Disclosure: Author owns CSX