UPS Shares Worth Investing in Before July 29th: Here's the Reason
United Parcel Service (UPS), a leading global package delivery company, is considered a potential buy ahead of its Q2 earnings report on July 29, 2023. This optimistic outlook is due to a combination of factors surrounding its stock price, dividend yield, and cost-cutting measures.
One of the key factors is UPS's high dividend yield, currently at an all-time high of 6.6%. This yield is significantly higher than the 10-Year Treasury yield (~4.5%), making it an attractive income source for investors. Although the market expresses doubts about its sustainability, UPS's solid free cash flow and strong balance sheet, as asserted by UPS leadership, provide a strong foundation for the dividend's continuity [1][5].
Shares of UPS are trading near pandemic-era lows (~$100), with investors bracing for disappointing earnings or even a dividend cut. This pessimism suggests that the stock may be undervalued, and any positive outcome could serve as a catalyst for gains [3].
UPS is actively executing a $3.5 billion cost-cutting plan. This plan includes closing facilities and reducing the workforce, aiming to improve margins despite reduced package volumes in a normalized post-pandemic environment [3]. The company is also moving away from lower-margin work, such as scaling back its relationship with Amazon [8].
Analysts believe that UPS is positioned for a "measured return to form" that the market is not fully accounting for. This potential for upside, combined with the market's low expectations ("priced in"), makes it an attractive investment opportunity before the earnings are released on July 29, 2023 [3].
It's important to note that UPS still has more work to get its business where it needs to be. However, management's actions indicate a focus on cutting fat, rebuilding efficiency, and facing reality [9].
For investors who believe UPS provides an essential service and are willing to take on near-term turbulence, UPS might be worth a closer look. Global tariffs and elevated labor costs remain risks for UPS, but they are known and may be priced in [2].
References:
- UPS's Dividend Yield
- Risks for UPS
- Buy Thesis for UPS
- UPS's Margins Improving
- UPS's Solid Free Cash Flow
- UPS's Free Cash Flow and Dividend Commitment
- UPS's Revenue per Package
- UPS Scaling Back Amazon Relationship
- UPS's Focus on Cutting Fat
- Given the company's high dividend yield and attractive income source for investors, the current low price of UPS shares may make it an appealing investment opportunity, especially as the Q2 earnings report approaches on July 29, 2023.
- As UPS actively implements a $3.5 billion cost-cutting plan by closing facilities, reducing the workforce, and moving away from lower-margin work, investors may view these measures as a positive step towards improving business efficiency and margins in the normalized post-pandemic environment.
- Although global tariffs and elevated labor costs remain risks for UPS, analysts believe the market may not be fully accounting for the potential for UPS to make a "measured return to form," making it an attractive investment opportunity before the earnings are released on July 29, 2023.
