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How Amazon is Helping UPS in its Business

Jul. 05, 2017 8:47 AM ETUnited Parcel Service, Inc. (UPS)23 Comments
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The Dividend Guy


  • UPS is the largest package delivery company in an industry where size does matter.
  • Through its success, Amazon is stimulating the eCommerce industry, inviting many retailers to use UPS delivery services.
  • Buying shares of UPS is a less volatile move than buying shares of AMZN.

As Amazon (AMZN) grows its revenue, its delivery demand increases accordingly. While Amazon is building its own truck & drone army to deliver its goods, I don’t think it is a threat to UPS (NYSE:UPS) and other delivery companies; I think it’s an opportunity. I believe UPS can use this situation to its advantage. In a short-term perspective, UPS will continue to deliver for Amazon as their internal delivery operations won’t grow fast enough to meet their needs. In a long-term vision, UPS will continue to grow their revenues from international shipping coming from other eCommerce retailers. Amazon is somewhat inducing all classic brick & mortar retails such as Wal-Mart (WMT) and Target (TGT) to massively invest in their online platform where is where the customers want to shop now. This naturally increases the amount of package delivery demands. Let’s take a deeper look at UPS as a potential investment.

What Makes UPS a Good Business?

UPS is the world’s largest package and delivery company. In 2016, it delivered 4.9 billion packages and documents - 19.1 million daily - and generated $51 billion in revenue. UPS has evolved in an industry where size does matter. This enables the company to have a larger distribution network and offer clients more flexibility in their delivery options. Through economies of scale and tight management, UPS is not only the largest delivery company, but it also shows the strongest margin of the industry:

Source: UPS presentation

Surprisingly enough, UPS keeps finding new ways to minimize their operational costs. Their latest cost cutting & optimization plan is expected to save up to $1 billion.

Source: UPS presentation


Revenue Graph from Ycharts

Since the 2009-2010 recession, UPS revenue growth has followed a steady uptrend. Revenues were boosted by the economy getting better and online shopping increasing. The company

This article was written by

The Dividend Guy profile picture
My name is Mike and I’m the author of The Dividend Guy Blog & The Dividend Monk along with the owner and portfolio manager here at Dividend Stocks Rock (DSR). I earned my bachelor degree in finance-marketing, own a CFP title along with an MBA in financial services. Besides being a passionate investor, I’m also happily married with three beautiful children. I started my online venture to educate people about investing and to be able to spend more time with my family. I started my career in the financial industry back in 2003. I earned several promotions along with a good pile of diplomas. I had lots of fun working with clients in private banking for half a decade, but thought I could do more with my life. In 2016, I decided to take a leap of faith and left everything behind to travel across North America and Central America with my family. We drove through nine countries and stayed three months in Costa Rica before returning home. This was an eye-opening adventure that led me in 2017 to quit my job in the financial industry and pursue my dream; helping others with their personal finance through my investing websites. You just found the reason why I quit my suit & tie job!

Analyst’s Disclosure: I am/we are long AMZN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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