Category: UPS News
Has the investment thesis changed?
FedEx and UPS are proactively taking measures to improve profitability Opens a New Window. (dimensional-weight pricing, adjusted oversize package surcharges, and so on), but it’s proving harder than anticipated to grow margin with e-commerce deliveries. In a nutshell, we know capital expenditures are likely to go up, but we can’t be clear on whether FedEx and UPS have a handle on increasing profitability with e-commerce deliveries.
All told, investors should feel a little less comfortable holding UPS and FedEx, particularly at these valuation levels. E-commerce growth is creating challenges, and it’s not clear yet that both companies are overcoming them in terms of margin and cash flow generation.
It’s been a rough couple of weeks for investors in United Parcel Service(NYSE: UPS) stock, shares of which are off 10% since reporting earnings Opens a New Window. on Jan. 31 — but things are already starting to look up.
This morning, analysts at boutique investment banker Aegis Capital announced they are sticking with their projected price target of $120 on UPS shares. And since UPS has fallen back from that target, they’re going ahead and upgrading UPS stock as well — to buy. As the analyst points out, if and when UPS rises from its current valuation of $105 and change to hit $120, the stock will provide investors with a 13.6% equity profit. Throw in a hefty 2.9% dividend yield, and the total return on this stock could exceed 16.5%.
Profit and revenue miss expectations, as a bigger-than-expected surge in e-commerce sales came at a cost.
Shares of United Parcel Service suffered Tuesday their biggest one-day selloff in two years, as disappointing fourth-quarter results suggest the package-delivery giant was still having trouble adapting to the surge in online holiday shopping.
The results were also a stark reminder that not all business is good business.
UPS and FedEx are ideal opportunities for long-term investors
To begin with, United Parcel Service (NYSE:UPS) is an extremely boring transportation and logistics company that gets a little news time during the holiday season and then once again vanishes into the background. That being said, the transportation industry, which has been around for centuries, is more relevant today than ever, and the segment’s best years are yet to come as the world’s trade is taken over by e-commerce.