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United Parcel Service Inc. (UPS) is a delivery service provider providing supply chain management solutions. They provide transportation and delivery, distribution, ocean freight, air freight, custom brokerage, contract logistics, and more.
Valued at $111.7 billion by market cap, UPS operates through two business divisions - domestic and international package operations. Founded in 1907, its footprint within the U.S. and globally is so large that UPS is considered to be a bellwether of sorts for broader economic activity.
Atlanta-based UPS has struggled in 2024, pressured in part by a costly labor negotiation last year. The stock is down 18.6% on a YTD basis, and UPS has shed more than 30% over the past 52 weeks.
In late July, UPS stock tumbled to a fresh multi-year low of $124.80 after poorly received earnings. However, the sharp sell-off attracted at least one high-profile buyer to the shares.
UPS Delivered Poor Results
United Parcel Service reported its Q2 results on July 23, where revenue of $21.7 billion missed analysts' $21.9 billion estimate, even as volume improved during the quarter. The shipper attributed the top-line miss to lower revenue per item, with many analysts citing discounters like Temu and Shein as the likeliest source of the volume growth at UPS.
That said, earnings also took a hit, with the company reporting a profit of $1.79 per share against the $1.98 per share estimate. Along with lower revenue per item, UPS is struggling with higher expenses due to the new labor deal signed last year, along with a one-time regulatory settlement.
Looking ahead, CEO Carol Tomé expects the company to return to operating profit growth during the second half of this year. Management also narrowed its full-year guidance to $93 billion, from its previous range of $92 billion to $94.5 billion, and lowered its operating margin guidance to about 9.4%.
UPS also announced plans to reboot a $500 million share repurchase program, “given our strong liquidity,” with plans to raise the amount to $1 billion in the future.
5 Key Reasons to Watch This Insider Buy on UPS
On July 25, UPS Chair William Johnson purchased 5,000 shares of the company at $128.60 each. While this type of insider buying is typically viewed as bullish, there are five reasons to highlight Johnson's buy right now:
1. This is the biggest insider buy on UPS since 2020, when Carol Tomé bought 10.1K shares for $1 million shortly after joining the company as CEO.
2. This is the first insider buy on record by Bill Johnson since he joined the UPS board in 2009. The $643K transaction accounts for nearly his entire stake in UPS, at 5,160 shares.
3. The purchase came just two days after UPS plunged 12% in a single session on its Q2 results, and one day after the stock's new 3-year low of $124.80 was set intraday.
4. UPS stock does look like a good buy at current levels, trading at a forward P/E of 17.18x and forward price/sales of 1.21x.
5. The logistics company yields about 5% annually, and UPS reiterated a strong commitment to its dividend on the Q2 earnings call.
- With the stock looking like a good value, paying a generous dividend, and one very well-placed insider buying shares after a potential market overreaction, UPS could be a compelling value pick right now - particularly for investors seeking passive income.
What Do Analysts Predict for UPS?
Analysts are cautiously optimistic about UPS stock, which has a consensus “Moderate Buy” rating and a mean price target of $145.35, indicating an upside potential of 13.5% from current levels.
The stock is covered by a total of 24 analysts, with 12 “Strong Buy” ratings, 11 “Holds,” and 1 analyst recommending a “Strong Sell.”
