What’s Driving UPS Stock Higher?

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UPS: United Parcel Service logo
UPS
United Parcel Service

Despite seeing a 9% rise over the last six months, at the current price of around $212 per share, we believe UPS stock (NYSE: UPS) has more to go. UPS stock rose from levels of $195 in early September 2021 to $233 in early February 2022 before cooling off to $212 currently. The 9% move for UPS in the last six months compares with -3% returns for the broader S&P500 index. Looking at the longer term, UPS stock is up a solid 118% from levels seen in late 2018. Our dashboard – Why UPS (UPS) Stock Moved – provides more details on the factors behind this move over the last three years.

Now, much of this growth over the last three years was driven by the company’s P/S ratio, which rose from 1.1x in 2018 to 1.8x currently. UPS’ revenue increased 42% over the same period. The pandemic resulted in higher revenues in 2020 and 2021, as people stayed indoors with shelter-in-place restrictions and resorted to e-commerce for their needs, resulting in very high demand for residential ground shipments for UPS. The company’s revenue of $97.3 billion in 2021 compares with $71.9 billion in 2018. The total shares outstanding increased marginally to 874 million currently, compared to 866 million in 2018. This meant that revenue per share rose 41% to $111.33 in the last twelve months, vs. $82.95 in 2018.

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Given the rebound in economic activities and gradual lifting of shelter-in-place restrictions over the recent quarters, the volume growth of ground deliveries has slowed. While UPS saw a 14.5% rise in ground average daily package volume in 2020, the growth slowed to 1.6% in 2021. That said, with economic growth picking up pace, UPS’ other businesses, including next day air and international, are expected to see robust growth going forward. The company has guided for $102 billion in revenue in 2022, reflecting a 5% y-o-y growth if achieved.

While we believe that there is more room for growth in UPS stock going forward, there are near-term headwinds. Given the geopolitical tensions between Russia and Ukraine, it is likely that the broader markets may remain volatile in the near term, impacting UPS stock as well.

While UPS stock is likely to move higher in the near term, check out how UPS Peers fare on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

Returns Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 UPS Return 1% -1% 85%
 S&P 500 Return 0% -8% 95%
 Trefis MS Portfolio Return -1% -11% 245%

[1] Month-to-date and year-to-date as of 3/4/2022
[2] Cumulative total returns since the end of 2016

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