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Is UPS a buy into the holiday season?

It’s time to talk about a major delivery name within the market. Here is the breakdown on $UPS, better known as United Parcel Service.

Current Price: $160.26

52/Wk High: $178.01

52/Wk Low: $82.00

Market Cap: $137.8 billion

Dividend (Yearly): $4.04 / 2.23% Yield

Dividend (Quarterly): $1.01

Read below for the breakdown!

The United Parcel Service is a leading package delivery company operating in three core segments; US domestic package operations, Supply Chain & Freight, and finally International package operations.

Taking a look at the stock itself, the price can be broken down by segment. According to TREFIS (@trefis) 63.58% of $UPS is based on their US domestic segment. 

Furthermore, 22.79% of the stock price is based on the International package segment, 11.1% Supply Chain & Other Businesses, and 2.5% UPS Freight.

Digging into the most recent earnings report the numbers were mostly solid with few exceptions. The United Parcel Service reported a Q3 beat, with an EPS of $2.28 (10.1% growth) versus the EPS consensus estimate of $1.90.

Revenues for the quarter grew 15.9% since Q3 2019, landing at $21.2 billion. Not only did revenues grow as well, but Q3 operating profit was $2.4 billion, up 11%.

It is also important to note that year to date cash from operations as of Q3 was $9.3 billion and Adjusted Free Cash Flow came in at $5.9 billion in Q3.

On the downside due to management's decision to speed up its “fastest ground ever” initiative, operating margins for the US segment fell to 8.3% (2.3% decline).

The United Parcel Service also experienced additive cost due to the addition of 40,000 new employees in order to maintain operational efficiency.

Digging into the balance sheet the numbers could be better but are not bad.

Total Debt: $26.948 billion

Total Liabilities: $57.694 billion

Total Assets: $62.057 billion

Cash & Short Term Inv: $9.216 billion

Given the numbers, the valuation is currently implying a premium, but is not too far ahead of itself.

Price to Earnings: 31.21x

Price to Sales: 1.75x

Price to Book: 31.06x

Price to Cash Flow: 13.92x

When it comes to analysts, the so-called geniuses are quite bullish. Currently the mean price target is $177.06/share, representing a 10.97% gain. 

The high price target is $210.00/share, representing a 31.62% gain, while the low price target is $130.00/share, representing a -18.52% loss.

While the numbers and analysts are bullish, the big money is not as much. Currently, 66.50% of UPS is owned by institutions. Top holders include The Vanguard Group, BlackRock Institutional Trust, and State Street Global Advisors.

The technicals on the other hand could be a flashing opportunity. Currently according to the six-month charts the MACD is falling with strong downward momentum, within a range of 0.472 to -1.5781.

The six-month charts are also flashing an RSI of 43.89 and CCI of -107.8443, both of which are solid levels to enter a name. On a final note, UPS currently trades roughly 18 points off its highs.

In short, due to the continued COVID-19 pandemic and the upcoming holiday season, I expect huge volume for UPS, resulting in solid earnings growth.

I like $UPS here short to long term, but recommend scaling in, as shares could get slightly cheaper through market volatility in the near term.


Disclaimer: This is not direct financial advice, simply opinion based on independent research.

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