UPS stock: The bears vs. the bulls

“UPS (UPS) is a great company, but I see some significant short-term headwinds. Europe is decelerating faster than Asia or America, and UPS has 14% of sales — to FedEx’s 7% — from Europe, the Middle East, and Africa. With the $6 billion purchase of European shipper TNT Express, UPS doubled down on the region. That may be the best strategic move long term, but not in the short term. UPS’s U.S. volumes were up 0.1% year over year from April to May. But that doesn’t make up for the 3.5% drop in transatlantic shipments. To say the struggling airfreight environment will magically go up is laughable. A potential Apple product launch in the fourth quarter is certainly positive for the freight market. But FedEx (FDX) moves the vast preponderance of Apple products, not UPS.”

The bull: Kevin Sterling, BB&T Capital Markets

“Airfreight volume has slowed. But UPS has the unique advantage of owning its own planes, and recently garaged 10% of its fleet. UPS can then capture any surges in freight quickly by redeploying the planes. It might need to soon, if Apple buys up capacity to ship a new product. This could also increase prices for non-Apple shipments, since Apple (AAPL) commands such a large portion of the air. We also expect a record number of holiday shipments this year. Finally, TNT helps put UPS in a prime position to compete against DHL in the region. At $73, the stock is trading at about 14 times 2013 earnings. Historically, that’s an attractive entry point for UPS, and with a 3% dividend yield, we’re in with a target price of $90.”

This story is from the October 8, 2012 issue of Fortune.