Amazon Inc. (AMZN) has a knack for going into new markets and giving the competition a run for their money. But when it comes to who will win in the shipping delivery market, it is shipping veteran FedEx Corp. (FDX) that may just have the upper hand as Amazon prepares to launch its own delivery service.

FedEx has a superior cost structure in the eyes of Bernstein analyst David Vernon, who upgraded the courier’s shares to outperform in a report to clients issued last Friday, according to CNBC.

Price Growth

Vernon also raised his price targets for FedEx. The stock has already gained nearly 4% since he made his prediction last Thursday. Taking that into account, Vernon's targets imply one- and two-year increases of 14% and 23%, respectively, as of the close of trading on Monday.  

The Bernstein report also noted the stock’s attractive valuation and that FedEx is currently enjoying the fastest earnings growth in its history, according to a separate CNBC article. The company currently trades at a forward price-to-earnings (P/E ratio) of 15.02. (To read more, see: UPS, FedEx Fears on Amazon Are Overblown: JPMorgan.)

Cost Advantage

While Amazon is often credited with having a low-cost business model due to its e-commerce platform and technological prowess, Vernon argues that when it comes to delivery service, “Amazon clearly has a cost.” Despite Amazon Prime members enjoying “free” shipping, the price of that Prime membership jumped 18% in January from $10.99 a month to $12.99 a month.

One of the advantages that FedEx has, as the transportation labor market tightens due to the growth in e-commerce, is an established network that is “uniquely positioned to deliver that next decade of growth,” Vernon wrote in his report. Lacking that established network, Amazon will have to continue passing on costs to customers. 

FedEx has also done a good job recently of investing in the expansion and automation of its hubs, cutting down on labor costs and improving the speed of its service. Speed of service is where FedEx CEO Fred Smith believes his company has a definite competitive advantage. (How FedEx Can Rise 20% as Amazon Gets Squeezed.)

Amazon may know how to sell goods, but at least for now, FedEx is the established favorite at delivering them.