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By Jeff Bailey

UPS (NYSE:UPS) stock has traded steadily lower since just before the New Year as investors punished the company for its less-than-perfect handling of a surge of last-minute holiday shipments.

UPS data by YCharts

The entire slide represents a buying opportunity if you're bullish on world trade, bullish on Internet shopping and bullish on automation and American innovation. Let's recap some of the "bad news" that caused investors to cough up UPS shares in recent weeks:

  • December deliveries surged 20% vs. a year earlier. During the 2013 holiday season, UPS had 10 days on which package volume exceeded the previous daily record.
  • To catch up, UPS fielded 85,000 temporary employees; it had expected to use 50,000.
  • The peak delivery day, December 23, on which 31 million packages were handled, occurred six days later than UPS expected.

As UPS CEO Scott David noted in discussing fourth quarter results, "We experienced an unprecedented increase in volume, exceeding even our most optimistic plans."

The fumble was bad news and UPS got plenty of bad press, but it says the economic, business and consumer-behavior trends at work here are all fabulous news for UPS and its shareholders. A hidden gem in the early earnings season discussion. Sell UPS? How about marvel at a company that scrambles 35,000 workers on a moment's notice?

As we've written before, UPS is a productivity machine, using largely Teamster members as employees and yet handling higher numbers of packages per employee every year.

UPS Revenue Per Employee (Annual) data by YCharts

The rise of Amazon (NASDAQ:AMZN) and move to online shopping plays into UPS's hands; it's strong in ground delivery here and in Europe. The inexorable rise in global trade plays into its hands, too, along with those of FedEx (NYSE:FDX), as they operate behind a shared competitive moat. Replicating their fleets and logistics systems and business relationships at this late date seems almost as unlikely as someone building a new American railroad.

Meanwhile, UPS is as disciplined financially as it is operationally, generating enormous free cash flow, paying out money to shareholders at a clip that equals a current 2.6% dividend yield, and buying in stock such that its shares outstanding are falling significantly.

UPS Free Cash Flow (NYSE:TTM) data by YCharts

UPS Shares Outstanding data by YCharts

The shares aren't cheap, nor should they be, given UPS's market position, its demonstrated ability to reward investors and its singular ability to manage (rather than complain about) its unionized workforce. The dividend has grown rapidly.

UPS Dividend data by YCharts

UPS expects 2014 EPS to rise 11%-to-16% over 2013 results, which admittedly didn't live up to expectations of a year ago. Watching this company handle challenges that would cripple a weaker outfit is a great business lesson.

Disclosure: None.

Source: Bad News At UPS: It's All Good News