UPS Courier - Good Price & Good Company ? Better than FedEx ?

JC888
2023-02-06

My afterthoughts to Tiger_chat 's question of whether an investor profits from a good company or a good price ?

"Why not both" I asked myself ?

Wouldn't there be more upsides comparatively speaking ?

Having put the theory to test on companies type (see below for details); time to try it on an Integrated Freight & Logistics stock ?

Gonna put $United Parcel Service Inc(UPS)$  to the test & see if it fits the bill.

Sidetrack: Below are stocks that I have covered. Interested ? Click to read. Please "Like" to show some love okie ? Thanks !

  • An American multi-national shipping & receiving and supply chain management company
  • Founded in 28 Aug 1907 (a 115 yo company)
  • Founder were James E Casey and Claude Ryan
  • Its original name was American Messenger Company, specializing in telegraphs
  • In 1919, it made its first foray outside of Seattle in Oakland, California and changed its name to United Parcel Services; that remained until today.
  • In 1975, it expanded abroad into Canada. A year later in 1976 to West Germany.
  • Its the largest courier company in the world by revenue, ahead of competitors DHL & FedEx.
  • Today its primarily known for its ground shipping services, as well as the UPS Store, a retail chain which assists UPS shipments and provides tools for small businesses.
  • UPS grew into a mega cap company over the years via strategic acquisitions

In 2022, a year where US market has been hammered by extreme volatility and ease of covid pandemic restrictions - how did UPS fare ?

Current stock price < 07 Feb 2022 by -14.84%

UPS - Summary

  • Revenue came in at $27.03 Billion vs $27.77 (Q4 2021); thats a -2.66% decline 
  • Net Profit (GAAP) came in at $3.45 Billion vs $3.09 Billion (Q4 2021); thats a +11.65% gain
  • Earnings per share (GAAP) was $3.96 vs $3.52 (Q4 2021); thats a +12.5% gain
  • Similarly EPS (non GAAP) was $3.62 vs $3.59 (Q4 2021); thats a +0.8% gain

UPS - Revenue breakdown analysis

  • Domestic demand constitutes 67.5% of UPS's revenue; followed by International feight serves at 18.3% and Supply chain solutions making up 14.2%.
  • For Q4 2022, US registered a +3% growth in revenue while International courier services & Supply chain solutions saw contractions of -8% & -18% respectively

UPS - Operating statistics

  • Average daily package volume fell -4.5% in the Dec 2022, although revenue earned per piece rose +5.2%.

UPS - Other highlights

  • Operating profit (GAAP) came in at $3.2 Billion vs $3.89 (Q4 2021); thats a -17.34% decline
  • Casn & cash equivalent was $5.6 Billion vs $10.26 (Q4 2021); thats a -45.42% decline

UPS's CEO on Q4 2022 Results

For the year, we reached our targeted consolidated operating margin and return on invested capital goals one year earlier than originally anticipated. Our results in 2022 demonstrate our strategy is working. UPS, CEO, Carol Tome....

Is United Parcel Service (UPS) A Good Price and Good Company ?

2022 Top 10 Most valuable Logistics brands

  • Being at the top of the ranking comes with both benefits and banes
  • Trade growth worldwide is expected to slow this year as import demand weakens across major economies and several developing countries face debt shocks and food insecurity, according to the World Trade Organization’s forecast last Oct.
  • Domestically, anticipates US to face a mild recession in the 1st half of 2023 before a recovery in the 2nd half.
  • Overall, expects 2023 to be a bumpy year, considering (a) rising interest rates, (b) relative inflation, (c) Russia / Ukraine war, (d) China's gradual recovery from pandemic & lockdown and (e) UPS's US labor negotiations with the Labour union.
  • UPS's experience is not unique. Competitor FedEx reported revenue has slipped 3% and earnings fell by nearly 25% in the 3 months ended Nov. 30. FedEx's average number of packages handled daily has fallen by -10.2% as well.
  • Its betting on (1) productivity gains and (b) stronger business from small & midsize shippers can help it make up for an overall decline in package volumes
  • UPS is also practising "out of the box" strategy by shifting focus to high-margin shipments rather than just boosting volume
  • It has also announced that it would cut $500 million in capital expenditures by leasing certain locations instead of buying them.
  • It also aims to leverage on automation to optimize capacity during periods of shifting volumes.
  • Its revised shipping rates by +6.9% at end 2022 should be a boon to UPS’s margins as volumes sag and costs rise.

  • Do you think UPS is currently in a good price & good company position ?
  • Do you believe that UPS will be able to report a profit in 2nd half of 2023 ?

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