Tuesday, January 24, 2012

United Parcel Service (UPS) 2012 Review


United Parcel Service (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 at a 5% pace in the last ten years though dividends have increased at a 12% annual rate. It has a 30%+ return on equity. UPS suffered a slowdown in growth as a result of the 2009 recession; however, it has recovered and should return to above earnings growth as a result of:

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


(2) expanding its global exposure. It recently opened its new intra Asia hub in China. In addition, it is making key strategic investments in infrastructure and complementary operations in Asia, the Middle East and Eastern Europe,

(3) its continued investment in technology and service enhancements,

(4) its effort to raise its health care distribution business which is expected to grow at a well above average pace,

(5) an ongoing share repurchase program.

Negatives:

(1) it is in a highly competitive industry,

(2) approximately 60% of its work force in unionized subjecting it to the risks of work stoppages and slowdowns,

(3) its international exposure increases the risks of economic difficulty from both the EU and the more volatile emerging markets.

UPS is rated A by Value Line, has a 59% debt to equity ratio and its stock currently yields about 3.0%.

Statistical Summary


Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
UPS 3.0% 4% 43% 10
IND .1 3* 1 NA


Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
UPS 59% 43% 2 8% A
IND 87 29 NA 5 NA


*most companies in UPS industry do not pay dividends

Chart

Note: UPS stock made good progress off its March 2009 low, surpassing the down trend off its September 2007 high (red line) and the November 2008 trading high (green line). Until very recently the stock was in a trading range dating from 2004; however, it recently broke above the upper boundary of that trading range and re-set to an up trend (straight blue lines).. It is also in an intermediate term up trend (purple lines). The wiggly blue line is on balance volume. The Dividend Growth Portfolio owns a one half position in UPS. Additional shares would be Bought at $70; the lower boundary of its Buy Value Range is $88.




http://finance.yahoo.com/q?s=UPS


Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.