Core Viewpoint - UPS is expected to experience a significant profit increase in the second half of 2024, following a challenging first half marked by a decline in profits and delivery volumes [1][2]. Group 1: Financial Guidance - For the first half of 2024, UPS anticipates a revenue decline of 1% to 2%, while the second half is projected to see revenue growth of 4% to 8%, with total revenue for the year estimated between $92 billion and $94.5 billion [2]. - Adjusted operating profit is expected to decrease by 20% to 30% in the first half, but is forecasted to increase by 20% to 30% in the second half, with a full-year profit estimate of $9.2 billion to $10 billion [2]. Group 2: Cost Management - UPS plans to cut 12,000 jobs in 2024, which is expected to generate $1 billion in cost savings, with 75% of these cuts occurring in the first half [4]. - The company will begin to see favorable cost comparisons in the second half of 2024 as it laps the increased labor costs from a new contract established in 2023 [3][4]. Group 3: Volume Recovery - Management expects delivery volumes to recover in the second half of 2024, contributing to the anticipated revenue growth [5][7]. - The U.S. domestic package segment saw a decline of 3.2% in the first quarter of 2024, but the rate of decline slowed, and a slight positive growth is expected in the second quarter [6][7]. Group 4: Future Outlook - UPS is positioned for a stronger performance in the second half of 2024, with increasing volumes, growing revenue, and easing cost comparisons [7]. - The company's focus on key markets such as healthcare and small and medium-sized businesses, along with investments in automation, is expected to drive revenue growth and margin expansion beyond 2024 [7].

Group 1 - United Parcel Service (UPS) has announced the sale of its Coyote Logistics business unit to RXO, Inc. for $1.025 billion, which is less than the amount UPS paid to acquire Coyote Logistics in 2015 [1] - The sale is expected to allow UPS to focus on its core businesses and allocate resources towards developing new services and solutions for future client needs [1][2] - The transaction is subject to regulatory review and is anticipated to close by the end of 2024, after which UPS will update its financial guidance [1] Group 2 - Coyote Logistics is a global third-party logistics provider that collaborates with 100,000 network carriers and manages 10,000 loads per day [1] - UPS CEO Carol B. Tome emphasized that the decision to sell Coyote Logistics aligns with the company's goal to become the premium small package provider and logistics partner globally [2] Group 3 - UPS currently holds a Zacks Rank 3 (Hold), while GATX Corporation and Trinity Industries, Inc. are better-ranked stocks in the Zacks Transportation sector, both holding a Zacks Rank 1 (Strong Buy) [3] - GATX has shown a positive earnings surprise history, surpassing the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 7.49% [3] - Trinity Industries has raised its 2024 earnings per share guidance to a range of $1.35 to $1.55, reflecting an upward revision from previous guidance [4]

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Company Overview - United Parcel Service (UPS) closed at $136.60, reflecting a -0.2% change from the previous day, which was a slight lag compared to the S&P 500's daily loss of 0.16% [1] - Over the past month, UPS shares have decreased by 1.6%, which is better than the Transportation sector's loss of 4.01% and lagging behind the S&P 500's gain of 3.15% [1] Earnings Forecast - The upcoming earnings release is anticipated, with an expected EPS of $2, indicating a 21.26% decline compared to the same quarter last year [1] - Revenue is projected to be $22.37 billion, reflecting a 1.42% increase from the prior-year quarter [1] - For the full year, analysts expect earnings of $8.22 per share and revenue of $93.05 billion, marking changes of -6.38% and +2.3% respectively from last year [2] Analyst Estimates and Valuation - Recent changes in analyst estimates suggest evolving short-term business trends, with positive revisions indicating confidence in UPS's performance [2] - The Zacks Rank system currently rates UPS at 3 (Hold), with the consensus EPS estimate remaining stagnant over the past month [3] - UPS has a Forward P/E ratio of 16.65, which is a discount compared to the industry's average Forward P/E of 16.94 [3] - The company has a PEG ratio of 1.74, while the Transportation - Air Freight and Cargo industry has an average PEG ratio of 1.43 [3] Industry Context - The Transportation - Air Freight and Cargo industry is part of the broader Transportation sector, holding a Zacks Industry Rank of 103, placing it in the top 41% of over 250 industries [4] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [4]

Company Overview - United Parcel Service (UPS) stock closed at $136.87, reflecting a +1.99% change from the previous day, outperforming the S&P 500's daily loss of 0.25% [1] - Over the past month, UPS stock has decreased by 6.66%, underperforming the Transportation sector's loss of 4.81% and the S&P 500's gain of 3.59% [1] Earnings Forecast - The upcoming earnings release is anticipated, with an expected EPS of $2, indicating a 21.26% decline compared to the same quarter last year [1] - Quarterly revenue is projected at $22.37 billion, representing a 1.42% increase from the previous year [1] - For the full year, earnings are estimated at $8.22 per share and revenue at $93.05 billion, reflecting changes of -6.38% and +2.3% respectively from the prior year [2] Analyst Estimates and Valuation - Recent adjustments to analyst estimates for UPS may indicate shifting business dynamics, with positive revisions suggesting analyst optimism [2] - UPS currently holds a Zacks Rank of 3 (Hold), with the consensus EPS projection remaining unchanged over the past 30 days [3] - The Forward P/E ratio for UPS is 16.32, which is a discount compared to the industry average of 16.66 [3] - UPS has a PEG ratio of 1.7, compared to the industry average PEG ratio of 1.42 [3] Industry Context - The Transportation - Air Freight and Cargo industry is ranked 97 in the Zacks Industry Rank, placing it in the top 39% of over 250 industries [4] - The top 50% rated industries tend to outperform the bottom half by a factor of 2 to 1 [4]

Core Viewpoint - Disney stock (NYSE: DIS) is considered a better investment choice compared to UPS stock (NYSE: UPS) due to its superior revenue growth and profitability, despite both companies having similar revenue bases of around $90 billion [1]. Group 1: Stock Performance - Both UPS and Disney have underperformed the broader markets over the last three years, with UPS declining 20% from $170 to $135 and Disney declining 45% from $180 to $100, while the S&P 500 increased by approximately 45% during the same period [2]. - UPS's stock returns were inconsistent, with a 27% increase in 2021, followed by declines of 19% in 2022 and 10% in 2023. Disney's returns were -15% in 2021, -44% in 2022, and a slight recovery of 4% in 2023 [2]. Group 2: Revenue Growth - Disney's average annual revenue growth rate over the last three years is 11%, significantly higher than UPS's 3% [4]. - UPS's revenue increased from $84.6 billion in 2020 to $90.6 billion in 2023, driven by e-commerce growth, but has recently slowed due to weakening consumer spending [4]. - Disney's revenue grew from $65.4 billion in 2020 to $88.9 billion in 2023, supported by a rebound in theme park attendance and increased streaming revenues [5]. Group 3: Profitability and Financial Risk - Disney's operating margin improved from 6% in 2020 to 11% in the last twelve months, while UPS's margin increased from 9% to 10% but has been trending downward due to rising operational costs [6]. - In terms of financial risk, UPS has a lower debt-to-equity ratio of 21% compared to Disney's 25%, and a higher cash-to-assets ratio of 9% versus Disney's 7% [6]. Group 4: Valuation and Future Prospects - The estimated valuation for UPS is $163 per share, indicating a potential upside of around 20% from its current price of $135, based on a 20x P/E multiple [7]. - Disney's estimated valuation is $137 per share, reflecting over 35% upside from its current market price of $100, supported by strong demand for its streaming and theme park businesses [7].

Core Insights - The article emphasizes the importance of both growth and valuation in identifying investment opportunities, particularly focusing on high-quality dividend growth stocks [3][22] - Companies like United Parcel Service (UPS) and Home Depot (HD) are highlighted as strong candidates for investment, with a focus on their growth potential and valuation metrics [22] Valuation Analysis - Fair value estimation is conducted using historical and future fair value calculations, comparing current metrics to historical averages [4][5] - The analysis indicates that Salesforce, Inc. (CRM) and Bristol Myers Squibb Company (BMY) are attractive based on both historical and future fair value perspectives [5][22] - A bubble plot is utilized to visualize stocks trading at discounts to both historical and future fair values, identifying potential investment candidates [5] Growth Analysis - The article discusses the challenges of predicting growth and utilizes various metrics, including past EBITDA growth and dividend growth, to estimate future growth [6][8] - Companies like Mastercard, Intuit, and Visa are noted for their high growth potential, while UPS and HD are compared for their growth characteristics [8][12] - The analysis of Return on Invested Capital (ROIC) suggests that both UPS and HD have high ROICs, with HD appearing more attractive in sustaining growth [11][12] Comparative Analysis - The article compares UPS and HD based on growth expectations, with HD showing higher recent growth estimates compared to UPS [14][15] - Future earnings growth projections indicate that HD is more attractive than UPS, although both companies show solid revenue growth potential [15][16] - Payout ratios are examined, revealing that HD has a more favorable payout ratio compared to UPS, which is approaching 100% [17] Debt and Equity Considerations - The net debt positions of both companies are analyzed, with HD showing an increase in net debt over time while UPS maintains a stable net debt position [18][19] - The article highlights the importance of share count stability, noting that HD has decreased shares outstanding while UPS has maintained a consistent share count [19] Conclusion - The article concludes that both UPS and HD are excellent investment candidates, with UPS being attractively valued and HD showing strong growth characteristics [22] - The author expresses a preference for relying on valuation while incorporating growth into the investment decision-making process [22]

Company Overview - United Parcel Service, Inc. (UPS) is a global parcel delivery and supply chain management company with a market cap of $118 billion and over 500,000 employees [2] - The company operates across three segments: U.S. Domestic (66% of FY 2023 revenue), International (20%), and Supply Chain Solutions (14%) [2] - UPS is the world's largest package delivery company, delivering over 20 million packages daily across 120 countries using more than 500 planes and 100,000 vehicles [2] Investment Thesis - The long-term investment thesis for UPS is supported by two key tailwinds: rising global consumption due to population growth and increased wealth, and the significant rise of e-commerce driving demand for point-to-point shipping [2] - The company is well-positioned to benefit from the growing need for logistics services as more goods are shipped directly to consumers [2] Dividend Growth - UPS has increased its dividend for 15 consecutive years, with a 10-year dividend growth rate of 10.1% [3] - The most recent dividend increase was less than 1%, indicating potential volatility in future dividend growth [3] - The stock currently yields 4.8%, which is significantly higher than its five-year average by 190 basis points [4] Revenue and Earnings Growth - UPS's revenue grew from $58.2 billion in FY 2014 to $91 billion in FY 2023, representing a compound annual growth rate (CAGR) of 5.1% [5] - Earnings per share (EPS) increased from $3.28 to $7.80 over the same period, with a CAGR of 10.1% [5] - CFRA forecasts an 11% CAGR in EPS over the next three years, indicating a potential acceleration in growth [5] Financial Position - UPS maintains a solid financial position with a long-term debt/equity ratio of 1.1 and an interest coverage ratio over 10 [6] - The company has an average return on equity (ROE) of 87.7% and a net margin of 8% over the last five years, reflecting robust profitability [6] - UPS faces competitive pressures, particularly from customers like Amazon, which is developing its own delivery network [6] Valuation - The P/E ratio using adjusted TTM EPS is 17.1, which is considered low in the current market [7] - The P/CF ratio of 10.6 and sales multiple of 1.3 are also below their respective five-year averages, indicating the stock may be undervalued [8] - A dividend discount model analysis estimates a fair value of $172.78 for UPS shares, suggesting the stock could be undervalued by approximately 15% [8] Conclusion - UPS is well-positioned for growth in the e-commerce sector, with a strong dividend yield and a history of dividend increases [10] - The company is expected to navigate through competitive pressures while maintaining robust profitability and a solid financial position [10]

Core Viewpoint - UPS is in a recovery phase in 2024, facing challenges such as declining delivery volumes and elevated costs, but potential for value exists as the company aims for a turnaround [1][2]. Financial Performance - UPS expects adjusted operating profit to decline by 20% to 30% in the first half of 2024 compared to the same period in 2023, with a projected increase of 20% to 30% in the second half [2]. - The company aims to cut $1 billion in costs and is reducing its workforce by 12,000 jobs, with cost-saving impacts expected to be more significant in the second half of 2024 [3]. Growth Strategy - UPS is focusing on higher-margin markets such as healthcare and small and medium-sized businesses (SMBs) to maximize profitability rather than just chasing volume [5]. - The company plans to invest in technology and automation to improve productivity and reduce costs, targeting an adjusted operating profit of $14.3 billion in 2026, up from $9.9 billion in 2023, representing an annualized increase of 13% [5]. Market Conditions - The U.S. small package delivery market is currently experiencing overcapacity, which poses a risk to UPS's revenue growth targets [5]. - If delivery volumes recover as expected, revenue per piece is anticipated to grow again, particularly due to the focus on healthcare and SMBs [6]. Investment Outlook - Analysts project UPS to generate $8.22 per share in 2024, increasing by 19.5% to $9.82 per share in 2025, suggesting a valuation of less than 14 times 2025 earnings [3]. - The stock is viewed as a potential buy, with the recommendation to start with a small position and monitor delivery volume trends closely [7].

Core Viewpoint - UPS is currently facing significant challenges due to lower volumes and higher costs, particularly from wage inflation resulting from a new contract with the Teamsters union, which has led to a decline in share performance compared to the S&P index [2][5] Current Headwinds - UPS reported a revenue of $21.7 billion for the first quarter, down 5.3% year-over-year, with diluted earnings per share of $1.43 reflecting a 35% decline compared to the same period in 2023 [5] - Average daily volume decreased by 3.2% year-over-year, with B2B average daily volume down 5.5%, primarily due to declines in retail and manufacturing sectors [5] Secular Tailwinds - Despite current challenges, e-commerce continues to gain market share, which is expected to benefit UPS in the long term [6] - UPS is expanding its addressable market share, particularly in big and bulky deliveries and healthcare logistics, aiming for $20 billion in annual revenue from healthcare by 2026 [6] Financials - The combination of higher costs and lower revenue has significantly impacted profitability, with normalized diluted earnings per share falling almost by half [7] - Management is optimistic about revenue growth in the second half of the year [7] Strong Competitive Moat - UPS maintains attractive returns on invested capital, reflecting its strong competitive moat derived from its scale advantages and logistics network [8] - The company has secured a profitable air cargo contract with the U.S. Postal Service, enhancing its competitive position [10] Returns Business - UPS is leveraging its extensive store network to expand its returns business through initiatives like Happy Returns, which offers convenient return options [11] Peers - UPS has a stronger competitive moat compared to FedEx and DHL Express, as evidenced by its superior financial metrics [12][13] Dividend Policy - UPS has a high dividend yield of approximately 4.7% and intends to maintain its dividend despite reduced earnings, with a targeted payout ratio of 50% [14][15] Balance Sheet - UPS has a strong balance sheet with significant liquidity and investment-grade credit ratings, although its debt levels have increased over the past decade [16] Outlook - UPS is guiding for fiscal year 2024 revenue between $92 billion and $94.5 billion, with long-term targets of $108 billion to $114 billion by 2026 [18] Valuation - UPS is currently trading below its ten-year average price to cash flow from operations, indicating an undemanding valuation [19]