United Parcel Service (NYSE: UPS)
Quality Value Investing Research Report | $UPS Updated Coverage | May 2024
Summary:
United Parcel Service, Inc. is a dividend-paying large-cap stock in the industrials sector’s air freight and logistics industry.
A wide economic moat surrounds the company’s high-quality business model, albeit with average enterprise downside risks.
Its stock price has become more fairly valued, and its share price downside risks are average at best.
Due to this updated research report, QVI changed its coverage rating of Big Brown in the Expanded Real-Time Stock Picks.
When referencing this research report, access your Quality Value Investing (QVI) Glossary of Investing Terms and Metric Targets and Research Report Format Guide. Unless noted, all data presented is sourced from Seeking Alpha Premium as of the intraday and market close on May 29, 2024, and intended for illustration only.
In this updated coverage QVI Research Report, we’ll reexamine the Expanded Real-Time Stock Picks industrials sector holding, United Parcel Service, Inc., to see if it continues to meet Quality Value Investing’s criteria based on our checklist analysis of the business’s current wealth and its stock’s present value.
UPS: Company Current Wealth
Value Proposition
United Parcel Service, Inc. UPS 0.00%↑ is a dividend-paying large-cap stock in the industrials sector’s air freight and logistics industry. It was added to the QVI Real-Time Stock Picks on February 17, 2022, at $191.85 cost basis per share, adjusted for dividends.
United Parcel Service Inc., a package delivery company, provides transportation and delivery, distribution, contract logistics, ocean freight, air freight, customs brokerage, and insurance services. It operates through two segments: the U.S. Domestic Package and the International Package.
The company also offers international air and ocean freight forwarding, post-sales, and mail and consulting services. In addition, it provides truckload and customs brokerage services, supply chain solutions to the healthcare and life sciences industries, fulfillment and transportation management services, and integrated supply chain and shipment insurance solutions.
United Parcel Service, Inc. was founded in 1907 and is headquartered in Atlanta, Georgia, USA.
Economic Moat
Morningstar assigns United Parcel Service a wide moat rating, weighted toward the company’s durable competitive and cost advantages.
QVI’s Value Proposition Elevator Pitch for UPS:
United Parcel Service or Big Brown is everywhere transporting and delivering packages, whether in the neighborhood, workplace, at the airport, or on the highway.
QVI’s value proposition rating for United Parcel Service: Bullish.
Returns on Management
Revenue Growth and Net Profit Margin
Per the chart below, United Parcel Service’s trailing three-year annualized revenue growth was low-single-digits positive and aligned with the industrials sector’s +4.92% median growth. However, the company’s topline growth was negative -9.25% for the most recently reported twelve months.
Farther down the income statement, United Parcel Service’s three-year, low-double-digit positive net profit margin beat the sector’s median net margin of +6.01%.
Returns on Equity and Invested Capital
United Parcel Service’s senior management produced a three-year double-digit return on equity, or ROE, above QVI’s targeted threshold and about six times the sector’s median ROE of +12.36%.
Stock buyback programs often elevate ROE. For example, United Parcel Service announced a $5 billion share repurchase program in 2023. Are they buying the shares at value prices on behalf of shareholders? We’ll answer the question in the valuation section of this report.
United Parcel Service’s three-year return on invested capital, or ROIC, was above QVI’s threshold and nearly quadrupled the sector’s median ROIC of +7.11%. Moreover, UPS’s ROIC exceeded its weighted average cost of capital, or WACC, of 9.74%, demonstrating that its senior executives are outstanding capital allocators. (Source of WACC: GuruFocus)
QVI’s business fundamentals rating for United Parcel Service.: Bullish.
Next, we’ll look at the company’s returns on management chart, enterprise downsize risks, the stock price’s present value, share price downside risks, and the investment thesis, each exclusive to Quality Value Investing’s premium (paying) subscribers.
Disclosure: At the time of this writing, I/we had no beneficial ownership of UPS common shares in our family portfolio. I wrote this report myself, and it expresses my own opinions. I am not receiving compensation for it other than from Substack paid subscriptions. I have no business relationship with any company whose stock is mentioned in this post.
Additional Disclosure: Quality Value Investing by David J. Waldron’s primary ticker research reports are for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs nor intended for portfolio construction beyond his family portfolio, which is presented solely for educational purposes. David is an individual investor and author, not an investment adviser. Readers should always engage in their own research or due diligence and consider (as appropriate) consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or specialized attorney before making any investment, income tax, or estate planning decisions.