7. United Parcel Service, Inc. (NYSE:UPS)
52 Week Range: $123.12 – $163.82
Current Share Price: $134.26
Number of Hedge Fund Holders: 44
Market Capitalization as of September 30: $115 Billion
United Parcel Service, Inc. (NYSE:UPS) is a shipping magnate that engages in the transportation, delivery, and distribution of express letters, documents, small packages, and palletized freight. Shares of the shipping company have plunged significantly close to 52-week lows, attributed to disappointing quarterly performance and weak guidance.
United Parcel Service, Inc. (NYSE:UPS)’s underperformance can be attributed to economic challenges, such as supply chain disruptions and consumer demand changes, affecting the global shipping and logistics industries.
Revenue in the second quarter was down by about 1% to $21.8 billion, missing consensus estimates of $22.18 billion. On the other hand, profits fell 32% to $1.41 billion compared to $2.08 billion delivered in the same period last year. The stock also took a hit on management, narrowing the revenue outlook to $93 billion from a previous guidance of between $92 billion and $94.5 billion.
Amid the disappointing quarterly results and guidance, U.P.S. returning to growth in terms of shipping volume for the first time in nine quarters suggests normalization from the pandemic highs. Additionally, United Parcel Service, Inc. (NYSE:UPS) is one of the blue-chip stocks to buy at 52-week lows as it is well poised to benefit from the lower interest rate environment.
The Fed cutting interest rates by 50 basis points should significantly impact consumer purchasing power, allowing United Parcel Service, Inc. (NYSE:UPS) to enjoy increased shipping volumes and generate more revenues.
At 8.24%, United Parcel Service, Inc. (NYSE:UPS)’s operating margin is increasing. In addition, the company’s strong dividend yield of 4.86% is close to its peak of the last ten years. Because of this, UPS is a desirable choice for income-focused investors. The company has also announced plans to return $500 million to shareholders heading into year-end as part of its buyback plan.
At the end of Q2 2024, 44 hedge funds reported holding stakes in United Parcel Service, Inc. (NYSE:UPS), with a total value of $1.31 billion. As of June 30, Citadel Investment Group was the largest stockholder, with a stake valued at $403.7 million.
Artisan Partners’ Artisan Value Fund stated the following regarding United Parcel Service, Inc. (NYSE:UPS) in its first quarter 2024 investor letter:
“United Parcel Service, Inc. (NYSE: U.P.S.) was a Q4 2023 purchase. When we initiated our position, shares were under pressure due to concerns about its new labor contract diverting volumes and driving up costs, as well as the continued normalization of volumes following COVID-related gains. The stock moved higher after we purchased it but gave up those gains in January when the company reported weaker-than-expected shipping volumes and a decline in revenue in the prior quarter. Despite the long-term growth tailwinds from the secular shift toward e-commerce, the shipping business is still cyclical, so disappointments will happen. However, we welcomed the market’s short-term focus as it provided us an opportunity to purchase U.P.S. at an undemanding valuation of less than 11X our view of normalized earnings. U.P.S. is a good transport operation that easily earns its cost of capital, generates significant free cash, has a wide economic moat, has a strong financial profile and pays an attractive dividend yielding 4%. With the new 5-year labor agreement completed, we believe U.P.S. can focus on regaining lost volume and improving its cost structure.”
