ReachX logo

United Parcel Service Inc - Fundamental Investment Case

Research

Publication Date: 25 Feb 2019 - By Robert Prather By Robert Prather
Actionable
Differentiated

Equity Fundamental Equity USA UK Transport

Qualitative Concerns:

  • Competitors such as USPS stealing share by offering lower prices
  • One of the major business generators for UPS aggressively developing its own in-house logistics service and luring shippers with deep discounts
  • Lots of startups competing directly with UPS in freight logistics have emerged recently and growing rapidly
  • UPS failed to keep up with the e-commerce growth, which has resulted in market share loss
  • E-commerce, which accounts for a big portion of UPS package volumes, is expected to decelerate

Fundamental Concerns:

  • 80% of the business experiencing volume decelerating and 40% experiencing revenue deceleration
  • Revenue per package has mostly failed to keep up with base rate hikes due to negative product mix shift
  • Growth of low yielding package volume pressuring operating margins
  • In our view, UPS hasn't been investing enough in the business which has helped it with higher FCF
  • As UPS ramps up CapEx, failure to generate enough FCF may force it to cut dividend
  • Analyst estimates at the high-end of guidance seem overly optimistic

Bottom Line: A leading logistics service company facing increasing competition, pricing and margin pressure and market share loss.

United Parcel Service Inc

Source: VR Fundamental

Pages: 85

Released: 25 Feb 2019

Unlock for 35 credits

The Author

Robert Prather

Equity Analyst

Technology, Telecom & Media, Industrials, Consumer

Book

 

Most read

ReachX
1-15 Clere Street, EC2A 4UY
London, United Kingdom
info@reachx.co
ReachX
1-15 Clere Street, EC2A 4UY
London, United Kingdom

info@reachx.co
Sign up to our newsletter