NEW YORK (MONEY Magazine) - This is the season for companies to deliver presents -- and also take back gifts that are being returned. So it's not surprising that shares of overnight shipper FedEx often perform well between Labor Day and Christmas.

Even so, FedEx recently managed to turn in surprisingly good results for the fiscal quarter that ended Nov. 30. For the period, earnings were up 33 percent on a 10 percent rise in revenues.

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Those results surpassed the company's guidance and beat analysts' consensus estimates by 13 cents a share.

As a result, FedEx raised the top of its projected earnings range for the full fiscal year ending May 31 to $5.70 a share from $5.50. The consensus estimate is higher, at $5.76.

Following the recent earnings report, FedEx (Research) stock hit an all-time high of $105. That's more than two and a half times the price five years ago.

Trading at just over 18 times earnings for the current year -- and 16.5 times projections for the following fiscal year -- FedEx seems fairly priced. The key question is whether this is the best time to buy.

FedEx shares have risen fairly steadily since late 2001, though the stock typically performs strongly in the months leading up to Christmas, and can give back some of its gains in the first half of the year after a run-up.

Recent strong profits have been driven chiefly by the success of FedEx Express overnight delivery service, which has thrived because of the strong economies in the United States and parts of Asia. The Express division accounts for two-thirds of the company's revenues.

The company's much smaller Ground delivery service has not done quite as well, chiefly because of competition from UPS and ongoing labor disputes. These disputes, which involve drivers' status as independent contractors and their eligibility for certain benefits, don't threaten the business but could result in additional costs in the future.

FedEx's smallest division, Kinko's is also under-performing. FedEx acquired Kinko's nearly two years ago and has yet to find a way to generate extra benefits from having the additional outlets for sales.

Investors can view this situation in two opposite ways. The bulk of FedEx's growth is coming from its traditional air express business, which is a bellwether for the U.S. economy. Gains in the stock price all hinge, at this point, on that single but powerful engine and good economic times.

On the other hand, one could see the under-performing third of the company as an opportunity. If FedEx is able over time to make the Ground division more profitable, or if it is able to make the Kinko's acquisition pay off, there will be upside that is not already reflected in the share price.

In fact, FedEx's delivery system is now so extensive and complex that it is difficult for new competitors to enter the market. The long-term success of the Ground division and Kinko's outlets would only further entrench FedEx's competitive advantages.

Analysts seem to believe in the company's long-term expansion possibilities. They project compound earnings growth of 15 percent annually over the next five years.

Value-conscious investors may want to track FedEx stock over the next six months, hoping for a pullback.

But sometimes waiting for a bargain only means that you miss your chance. FedEx stock is not overpriced at today's levels and already looks like a good long-term buy.

Sivy on Stocks resources:

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