United Parcel Service, Inc. (UPS) in Secaucus, N.J., provides letter and package delivery, transportation, logistics, and other associated services. US Domestic Package and International Package are the company’s two operational segments.
The company's shares have gained 20.6% in price over the past year and 13.9% over the past six months to close yesterday's trading session at $206.64.
In addition, with customers relying increasingly on online platforms to shop, many retail stores have shifted their attention to their online presence. These factors have benefited UPS, since retailers, unable to handle the strain on their delivery systems, have turned to UPS to deliver online-ordered merchandise.
Here is what could shape UPS's performance in the near term:
Positive Development
Last Month, UPS announced the entrance of 1,495 of its drivers, including 38 from Canada, into the Circle of Honor, an exclusive group of UPS drivers who have not had an avoidable accident in the last 25 years or more. This new class, made up of drivers from four continents, represents a total of 37,375 years of safe driving experience.
Strategic Collaboration
Last month, ESW, the leading global direct-to-consumer (DTC) e-commerce company, announced a partnership with UPS to provide integrated international e-commerce and shipping capabilities for brands looking to accelerate their DTC expansion, allowing them to be more effective at reaching global consumers through cross-border e-commerce. UPS customers and ESW clients will benefit from the companies’ capacity to completely localize their online shopping experience and utilize UPS' worldwide transportation and customs brokerage infrastructure for delivery through this new packaged solution.
Strong Profitability
UPS' 13.3% trailing-12-months net income margin is 103.7% higher than the 6.5% industry average. Also, its ROC, EBITDA margin, and ROA are 335.6%, 48.8%, and 260.6% higher than the respective industry averages. Furthermore, its $15.01 billion in cash from operations is 7435.7% higher than the $199.15 million industry average.
Impressive Growth Prospects
The Street expects UPS' revenues and EPS to rise 4.9% and 5.8%, respectively, year-over-year to $102.01 billion and $12.83 in its fiscal 2022. In addition, UPS' EPS is expected to rise at a 14% CAGR over the next five years. And the company has an impressive earnings surprise history; it topped Wall Street EPS estimates in each of the trailing four quarters.
Consensus Rating and Price Target Indicate Potential Upside
Among the 20 Wall Street analysts that rated UPS, 11 rated it Buy, and eight rated it Hold. The 12-month median price target of $241.35 indicates a 16.8% potential upside. The price targets range from a low of $150.00 to a high of $275.00.
POWR Ratings Reflect Solid Prospects
UPS has an overall B grade, which equates to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. UPS has an A grade for Sentiment and a B for Quality. Analysts' ratings and price targets are in sync with the Sentiment grade. In addition, UPS' solid profitability is consistent with the Quality grade.
Among the 17 stocks in the A-rated Air Freight & Shipping Services industry, UPS is ranked #6.
Beyond what I stated above, we have graded UPS for Value, Growth, Stability, and Momentum. Get all UPS ratings here.
Bottom Line
With a thriving e-commerce industry and surging online sales, UPS is anticipated to witness robust growth. Furthermore, UPS' diverse business is likely to be the primary driver of the company's growth. In addition, given favorable analysts' sentiments, the stock could continue to rally in the coming months. So, we think the stock could be a great bet now.
How Does United Parcel Services Inc. (UPS) Stack Up Against its Peers?
UPS has an overall POWR Rating of B, which equates to a Buy rating. Check out these other stocks within the same industry with an A (Strong Buy) rating: Universal Logistics Holdings Inc. (ULH) and Deutsche Post AG (DPSGY), and Bristow Group Inc. (VTOL), which have a B (BUY) rating.
UPS shares were trading at $202.90 per share on Monday morning, down $3.74 (-1.81%). Year-to-date, UPS has declined -4.65%, versus a -4.32% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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