1 Magnificent Industrial Stock Down 60% to Buy and Hold Forever

Core Viewpoint - The company, United Parcel Service (UPS), is undergoing a significant business transformation while providing essential services to modern society [1]. Group 1: Business Performance and Market Conditions - During the pandemic, UPS experienced a temporary surge in demand for its package delivery services, leading to a spike in stock prices, which later fell as demand normalized [2][5]. - UPS stock is currently trading approximately 60% lower than its peak during the pandemic, returning to pre-pandemic levels despite a broader market recovery [5]. - The company is now viewed as a turnaround story, with ongoing updates to its operations causing investor concerns about future performance [6]. Group 2: Operational Changes and Financial Impact - UPS is in the process of updating its operating systems and streamlining operations, focusing on more profitable business segments, which incurs significant costs [8]. - In Q2, UPS reported after-tax transformation strategy costs of $57 million, impacting earnings by $0.04 per share, while revenue fell 2.7% year over year [9]. - Despite lower revenue, revenue per piece in the U.S. market increased by 5.5%, indicating a positive shift in customer and product mix [10]. Group 3: Long-term Outlook and Dividend Concerns - The package delivery business is expected to grow in importance, and UPS is making strides to enhance profitability through operational updates [11]. - The dividend yield of 7.4% is becoming less sustainable, with a payout ratio exceeding 100% in Q2, raising concerns about potential dividend cuts [12]. - For long-term investors, UPS presents a compelling turnaround opportunity, supported by a critical delivery business that is difficult to replicate [12].