As of today (4/2/2015) UPS stock is at a price of around $96.50. It has been going down for the last two and a half months after hitting a 52 week high of $114.40 and it is right now effectively flat for the last year. Not a good performance but I see it as a decent entry point to a stock that pays almost 3% in a dividend while you wait for better news ahead.
UPS was hit hard after the Christmas quarter revealed that they hired too many temporary delivery workers and expenses soared as a result. Customers got their packages on time but profits suffered. This was in response to the prior Christmas season (2013) where they underestimated demand and didn’t hire enough part time help. This caused a backlash from customers that didn’t get their packages on time. So in my opinion, the company has likely learned from these two years of hiring too little and too much help and will get it right for Christmas 2015. Its no guarantee but I see a decent chance to have a much better year end in 2015.
Another catalyst for better profits is the low price of energy. It is widely thought that energy costs will remain low for the rest of 2015 and this should help UPS and any business that is in the delivery business.
A third tailwind to the stock is the change in way they are determining the weight and the cost of shipping packages. Instead of pricing just by weight alone, they are adding a dimensional aspect to the price so that larger packages that take up valuable space will cost more. Package size is something that can eat into profits as larger and lighter parcels take up valuable space and limit the number of packages that can be put on their planes and trucks. You can read about the pros and cons of doing this here and it seems like some of UPS’s main competitors are also going to be implementing a similar pricing system. This is not a slam dunk positive though, as the United States Postal Service won’t be adopting this and customers might opt to ship by them if they feel the cost savings is big enough.
UPS’s stock price has come down enough that the company might weather any market wide sell off better than others. The dividend helps the stability of the price and offers you a nice return for long term investors. This Big Bet Stock Pick is NOT a short term play but one that is better suited for patient investors.
*As always, please remember that this stock pick is not a recommendation to buy and is only my opinion. Before you buy any stock discussed on this website, please do your own research and/or consult your own stock broker professional. This website is for entertainment purposes only and I cannot be liable for any investment decisions you make.