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United Parcel Service (NYSE:UPS) is the world’s largest integrated air and ground package delivery service, operating in over 200 countries. The company also offers specialized transportation and logistics services. UPS had grown its earnings and dividend 10-15% pace since its founding; it has a 30%+ return on equity. UPS suffered a slowdown in growth as a result of the 2009 recession; however, it should return to above earnings growth as a result of:

(1) As the economy improves, the company should experience operating leverage with improved pricing, volume and technological enhancements,

(2) Expanding its global exposure.

(3) It is increasingly focused on the healthcare industry,

(4) An ongoing share repurchase program.

Negatives:

(1) It is in a highly competitive industry,

(2)60% of its labor force is unionized exposing it to strikes, stoppages and slowdowns,

(3) Its exposure to Europe subjects to the negatives of any economic slowdown.

UPS is rated A by Value Line, has a 50% debt to equity ratio and its stock currently yields about 2.7%.

Statistical Summary

Stock Yield

Dividend Growth Rate

Payout Ratio

# Increases Since 2001

UPS

2.7%

6%

48%

9

IND**

.1

5*

1

NA

Debt/Equity

ROE

EPS Down Since 2001

Net Margin

Value Line Rating

UPS

50%

39%

2

8%

A

IND**

113

38

NA

5

NA

*most companies in UPS industry do not pay dividends

** IND is the average of the Air Transport Industry as compiled from Value Line data

Chart

Note: UPS stock made steady progress off its March 2009 low, surpassing the down trend off its October 2007 high (red line) and the November 2008 trading high (green line). Long term the stock is in a trading range; the straight blue line is the lower boundary of that range. Intermediate term, UPS is also in a trading range (the purple line is the lower boundary; the upper boundary of the long term trading range is also the upper boundary of the intermediate term trading range). However, the stock is clearly preparing to challenge those upper boundaries. We would not Buy the stock at this critical stage. The wiggly blue lines are Bollinger Bands. The Dividend Growth Portfolio owns a 50% position in UPS. Shares would be Added at $58; the lower boundary of its Sell Half Range is $76.


(Click to enlarge)

Source: I Would Not Buy UPS At Current Price Levels