C'mon Wall St. Give UPS some love

[Treegrower]

I don't come here all that often and I post even less, but I was shocked today to see FedEx at $80.00 (something) and we were at 57.00 (something) about a $24 dollar difference in the price of our stocks. What gives? Today FedEx jumped $1.69 while we were up only a paltry 11 cents at the close. Please spare the " it's because we are union" standard lines. That cannot account for all of it. Why does Wall St. just love FedEx to death and gives us no love?

[klein]

A lot to blame is the devaluation of the US dollar.
As currencies rise and rise against the greenback, UPS makes less and less profit.
For example, just 6 months ago a UPS package driver was earning about $20 US/hr in Canada now it's $25.00.
20%+ more on wage costs, basically all around the world.

Where as, Fedex ground is mostly contracted out.
And the currency therefor stays in other countries, without fluctuations.

To my opinion, that makes the big differnce.

[wyobill1956]

Last March 6 ups and Fed-Ex Crossed paths at 39 bucks a share. I posted a thread on which company you would invest your money in and the response was UPS overwelming. Since March Fex-Stock has kicked UPS
along with many other stocks.

Nov of 1999 Ups stock $50 a share

Oct 20, 2009 UPS $57 a share ( not a great 10 year investment)

[bluehdmc]

Originally Posted by wyobill1956

Last March 6 ups and Fed-Ex Crossed paths at 39 bucks a share. I posted a thread on which company you would invest your money in and the response was UPS overwelming. Since March Fex-Stock has kicked UPS
along with many other stocks.

Nov of 1999 Ups stock $50 a share

Oct 20, 2009 UPS $57 a share ( not a great 10 year investment)

Stock price alone can't be used a measure of an investment. Has UPS consistently paid a dividend? Has Fedex? Did the stocks split? If you just look at stock prices it's an investment only if you sell higher than you bought, but if 1 stock has consistently paid a dividend over time it could be the better investment.

[randomUPSISer]

Question: How many outstanding shares of FedEx exist? How many outstanding shares of UPS exist?

If fedex had only 10,000 shares, while UPS had 20,000 shares, you would expect the shares of FedEx to always be worth more assuming the two companies were the same. (I know they arent)

Does UPS give out too many shares of its stock to the point that the stock is diluted?

My gut feeling is that UPS is a dividend stock. The company "creates" too many pieces of stock from MIP, LTIP, and selling to employees at discount. I'm guessing the company doesnt buy enough of these back.

It would be really easy to bump the stock price up. Buy back more stock than you create. Eventually the company stock would be rarer and thus worth more since the total market cap would at least hang out around liquidation cost or higher. I dont think the management committee is really interested in growing stock price. I think they are happy getting rich dividend payments. So long as the stock price stays low those guys get huge numbers of stock units from MIP and LTIP.

I dont know who sits on the BOD for UPS, but since UPS used to be private and the private shares are worth more votes than public (was it 10:1?) then it would seem that the BOD would be filled with past high level managers with TONS of stock. They may be happy to hang out milking the company from a high dividend payment.

[brown67]

Stock price doesn't mean that much. Look at the at the market cap. That's the price of the stock times the total number of shares. In other words what the company is worth. If UPS had 100 total shares at 1 dollar each then the company would be worth 100 dollars. If fedex had 1000 shares at .10 then the company would be worth 100 dollars. See how stock prices doesn't matter.

Right now UPS market cap is 57.41 billion dollars. Fedex is 25.53 billion dollars. UPS is valued at more than double Fedex.

[wornoutupser]

Maybe the problem isnt Wall St.
Perhaps the problem is in Atlanta?

[nhguy]

It's not that difficult to understand the stock price valuation. UPS had about 1.2 billion shares being held and FEDEX last I knew had about 300 million shares outstanding. This is simple math. This makes FDX earnings per share higher and because their base is smaller then growth looks greater.

The intangible to the whole thing is that UPS in my opinion does a poor job dealing with Wall St. and the analysts. FEDEX also creates a much stronger public image thru there advertising campaigns. UPS needs to improve in all these areas to be in bigger favor with the institutions that own close to 48% OF ALL UPS shares.

REMEMBER THE BIG FISH ALWAYS EATS THE LITTLE ONES

[ups1990]

Originally Posted by nhguy

It's not that difficult to understand the stock price valuation. UPS had about 1.2 billion shares being held and FEDEX last I knew had about 300 million shares outstanding. This is simple math. This makes FDX earnings per share higher and because their base is smaller then growth looks greater.

The intangible to the whole thing is that UPS in my opinion does a poor job dealing with Wall St. and the analysts. FEDEX also creates a much stronger public image thru there advertising campaigns. UPS needs to improve in all these areas to be in bigger favor with the institutions that own close to 48% OF ALL UPS shares.

REMEMBER THE BIG FISH ALWAYS EATS THE LITTLE ONES

Your last sentence is confusing. Are you saying FEDEX has now become the big fish or is UPS still the big fish in the pond?
Somewhere in the earnings report, I read where the drivers were faulted for the weak earnings.

[JustTired]

If you allow Wall St. To force you into decisions about how to run the company, you will lose every time. On Wall St. it's all about greed. "How can I make money without actually working for it?" When a company goes public, they open themselves up to major manipulation.

This course is the only option for some companies. Those that need the investment will take their chances. I don't believe that UPS falls into that category. They had no trouble obtaining investors from within. The stock was solid and almost always rose in value. Now the price is controlled by the Wall St. crowd and the company has no way of controlling it other than making an effort to buy back stock and at some point returning to a privately held entity.

Slow and steady growth is not rewarded by those on Wall St. They want their money.....and they want it now.

As can be seen by the past several years......their greed has gotten so bad that there is a massive pile of destroyed companies in their wake. Will someone at UPS get wise and try to avert the same fate? Time will tell.

[nhguy]

UPS1990,

UPS is still the top dog in the industry but FEDEX tends to be more in favor with the Wall st bunch. Going public was the worst thing we could have done for everyone involved. Other than the initial bang, the stock has been a dividend play at best. It's a tough competitive industry and until FEDEX gets put on a level playing field their costs advantages are always going to challenge UPS.

REMEMBER THE BIG FISH ALWAYS EATS THE LITTLE ONES

[1989]

Would UPS have grown as much in the last 10 years without going public? Going public could have been key to growing the international business.

A public offering of stock can help a company gain prestige by creating a perception of stability. A company's founders, co-founders and managers gain an enormous amount of personal prestige from being associated with a client that goes public. Prestige can be very helpful in recruiting key employees and marketing products and services. When sharing ownership with the public, you spread the company's reputation and increase its business opportunities. By selling stock on an exchange your company can gain additional exposure and become better known. This exposure may lead to improved recognition and business operations. The public status can be leveraged when marketing goods and services. Often a company's suppliers and consumers become shareholders, which may encourage continued or increased business. In this example, a public company could have a competitive advantage over a private enterprise. An IPO can indicate credibility to a company's customers, which may lead to increased sales and a greater corporate profile. Once public, lenders and suppliers may perceive the company as a safer credit risk, enhancing the opportunities for favorable financing terms. Also, a public offering can create publicity that is effective when marketing your company.

[j13501]

Originally Posted by randomUPSISer

The company "creates" too many pieces of stock from MIP, LTIP, and selling to employees at discount. I'm guessing the company doesnt buy enough of these back.

It would be really easy to bump the stock price up. Buy back more stock than you create....

I dont know who sits on the BOD for UPS, but since UPS used to be private and the private shares are worth more votes than public (was it 10:1?) then it would seem that the BOD would be filled with past high level managers with TONS of stock. They may be happy to hang out milking the company from a high dividend payment.

Random,
A few points to address in your post. UPS doesn't "create" the stock it distributes in MIP, LTIP, etc. That would increase outstanding shares in the market. Instead, it uses retained cash for management compensation to purchase stock and then distributes it as earned compensation to the management team. In fact, during the last few years, we've bought back a larger amount of stock (than needed for MIP) with our extra cash- which helped keep our stock from trending even lower earlier this year.

Secondly, it was the Board of Directors prior to the IPO, that was filled with high level managers. In the last 10 years the make-up of the board has slowly changed so that it is overwhelmingly non-upsers that sit on the board. Only our current CEO (Scott Davis) and our former CEO (Mike Eskew) are board members who are/were employees of UPS.

It could be a valid argument that the change in the BOD to mostly non-upsers is responsible for the changes in today's "culture" at UPS, but everyone on the Board and the management committee wants to see share price appreciate. When you hold a large number of UPS shares, the valid of your investment increases much quicker with increasing stock price than with stable dividends. IMHO they want to see both.

[JustTired]

Originally Posted by j13501

Secondly, it was the Board of Directors prior to the IPO, that was filled with high level managers. In the last 10 years the make-up of the board has slowly changed so that it is overwhelmingly non-upsers that sit on the board. Only our current CEO (Scott Davis) and our former CEO (Mike Eskew) are board members who are/were employees of UPS.

It could be a valid argument that the change in the BOD to mostly non-upsers is responsible for the changes in today's "culture" at UPS, but everyone on the Board and the management committee wants to see share price appreciate. When you hold a large number of UPS shares, the valid of your investment increases much quicker with increasing stock price than with stable dividends. IMHO they want to see both.

And....therein lies the problem.

[1989]

Originally Posted by JustTired

And....therein lies the problem.

Maybe we need Al Gore on the board. Apple stock is at an all time high.

[randomUPSISer]

Originally Posted by j13501

Secondly, it was the Board of Directors prior to the IPO, that was filled with high level managers. In the last 10 years the make-up of the board has slowly changed so that it is overwhelmingly non-upsers that sit on the board. Only our current CEO (Scott Davis) and our former CEO (Mike Eskew) are board members who are/were employees of UPS.

It could be a valid argument that the change in the BOD to mostly non-upsers is responsible for the changes in today's "culture" at UPS, but everyone on the Board and the management committee wants to see share price appreciate. When you hold a large number of UPS shares, the valid of your investment increases much quicker with increasing stock price than with stable dividends. IMHO they want to see both.

I was under the impression that employee shares were worth 10 votes vs public shared being worth 1 vote.

Is this not the case? Seems like the BOD would be full of former employees if this were the case since they would have by far more voting power.

[JonFrum]

If you invested $1,000 on November 10,1999 in UPS stock at the opening price of $65 a share, and reinvested all dividends, you would now have $1,033.27. That's a 3.33% increase over almost ten years. See chart and table . . .
http://investor.shareholder.com/ups/...calculator.cfm

If you use $50 a share as your starting price, you would have done a bit better.
If you subtract the effects of inflation and taxes, as you must, you would have done worse.
- - - - -
Stock owned by the Board Members, and the Rules of Ownership . . .
http://investor.shareholder.com/ups/.../ownership.cfm
- - - - -
Klein, the depreciation of the US Dollar doesn't make a Canadian Driver any richer unless he spends his entire paycheck in the USA (like during a vacation.)

[JonFrum]

Originally Posted by brown67

Stock price doesn't mean that much. . .

I'm not taking investment advice from you.

[klein]

Originally Posted by JonFrum

- - - - -
Klein, the depreciation of the US Dollar doesn't make a Canadian Driver any richer unless he spends his entire paycheck in the USA (like during a vacation.)

No, but Corporate UPS has a higher payroll world wide.
And also higher fuel costs. (dollar down = oil price up).

[JonFrum]

Originally Posted by klein

No, but Corporate UPS has a higher payroll world wide.
And also higher fuel costs. (dollar down = oil price up).

Aren't UPS employees in far off lands paid in their local currency, from revenue earned in their local area?

Isn't the price of OIL denominated in US dollars world wide? If so then shouldn't everyone's fuel bills go up as well? Not just us.

[klein]

Originally Posted by JonFrum

Aren't UPS employees in far off lands paid in their local currency, from revenue earned in their local area?

Isn't the price of OIL denominated in US dollars world wide? If so then shouldn't everyone's fuel bills go up as well? Not just us.

You don't get it.
What do you think the quarterly results are, just from USA ? Or worldwide?
Ofcourse, worldwide.
So, everything has to be converted into US dollars.

Now, secondly.
As an example: 1 Canadian Dollar becomes $2.00 US.
At $100 a barrel of oil.
We will pay $50 cdn for it, you pay $100.
So, no, it's only the US that has to pay more for oil, if the US currency devaluates.
Euro, and other currencies can buy the US Oil based prices for cheaper.(with a cheaper dollar).

And thats not just oil. Everytime our dollar rises against the US greenbuck, all our shopping prices go down. From Walmart to veggies and fruit from the USA.
Even cars.
Basically, we get more for our buck !

[cachsux]

Klein, I`ve got some Enron stock I`ll sell you. I`ll even give it to you in Canadian dollars.

[JonFrum]

Originally Posted by klein

You don't get it.
What do you think the quarterly results are, just from USA ? Or worldwide?
Ofcourse, worldwide.
So, everything has to be converted into US dollars.

Now, secondly.
As an example: 1 Canadian Dollar becomes $2.00 US.
At $100 a barrel of oil.
We will pay $50 cdn for it, you pay $100.
So, no, it's only the US that has to pay more for oil, if the US currency devaluates.
Euro, and other currencies can buy the US Oil based prices for cheaper.(with a cheaper dollar).

I assume only a very small amount of UPS' worldwide revenue is brought back to the USA and converted to US dollars. I assume UPS has traders who hedge against a devaluation of the dollar so UPS doesn't loose money in the conversion of that small amount.

[klein]

Originally Posted by JonFrum

I assume only a very small amount of UPS' worldwide revenue is brought back to the USA and converted to US dollars. I assume UPS has traders who hedge against a devaluation of the dollar so UPS doesn't loose money in the conversion of that small amount.

You don't get it , here is another better example :

You send a package to Canada, eventually a cdn driver will deliver it... but now the cost went up... because that package was paid in US dollars.
Same worldwide.

All these drivers are earning more in US dollars...
Say, Phillipines for example, last yr they worked for $12 a day, now it's with exchange rate $20 a day.
The package that came from the US, now costs more ....(either raise rates or profits are lower).

[j13501]

Originally Posted by randomUPSISer

I was under the impression that employee shares were worth 10 votes vs public shared being worth 1 vote.

Is this not the case? Seems like the BOD would be full of former employees if this were the case since they would have by far more voting power.

Random,
You are correct. Class A shares (which are employee owned/purchased directly from UPS) have 10 votes to only 1 for Class B shares which are purchased on the open market.

The difference is that our company had to change the makeup of the BOD with the passage of the Sarbanes-Oxley Act in 2002. This law was passed after the Enron and Worldcom scandals. One provision called for a more "independent" BOD, which wouldn't just "rubber stamp" the wishes of the CEO, COO, etc. My understanding was that at least 1/2 the BOD had to be non-employees (or non- former employees).

In our typical way, we went above and beyond. Today 8 of the 10 UPS Board members are non-employee directors.

I believe that the 10 -1 ratio of votes between A and B shares doesn't make any difference because the people with the most shares believe that we have made the right decision regarding the Board make-up.