$UPS (United Parcel Service Inc) - ๐๐๐ ๐๐ฎ๐น๐๐ฎ๐๐ถ๐ผ๐ป ๐บ๐ผ๐ฑ๐ฒ๐น.
UPS is down, not out โ hereโs why the market may be mispricing it.
๐๐ฒ๐ ๐ฎ๐๐๐๐บ๐ฝ๐๐ถ๐ผ๐ป๐:
1. Explicit 10Y growth @ 2-3% (investors.ups.com/news-events/press-releases/detail/2146/ups-releases-2q-2025-earnings)
Historically, United Parcel Service (UPS) has experienced steady but moderate revenue growth, reflecting its position as a mature global logistics leader. Over the past two decades, UPSโs revenue has generally trended upwardโfrom around $36 billion in 2000 to roughly $91 billion in 2024โrepresenting a long-term compound annual growth rate (CAGR) of about 4โ5%. Growth has been driven by e-commerce expansion, international trade, and the companyโs strong U.S. ground network, though partially offset by cyclical slowdowns and intense competition from FedEx, DHL, and Amazonโs in-house logistics arm. Margins have fluctuated with fuel prices, labor costs, and pricing power, but UPS has maintained solid profitability through efficiency programs and premium service segments such as healthcare logistics. In essence, its historic growth has been stable rather than rapid, with recent years focused more on mix improvement and margin optimization than on large top-line expansion.
2. Long-term growth in perpetuity @ 2.6% (Global economic growth projection www.pwc.com/gx/en/world-2050/assets/pwc-the-world-in-2050-full-report-feb-2017.pdf)
3. WACC @ 7.6%
4. An EBITDA exit multiple of 11.8 for the Transportation industry (pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/vebitda.html)
5. Reinvestment: The input that drives reinvestment is the industry average Sales to Capital ratio = 1.56
๐ช๐ต๐ ๐ ๐ฏ๐ฒ๐น๐ถ๐ฒ๐๐ฒ ๐ถ๐ ๐ฐ๐ฎ๐ป ๐๐ผ๐ฟ๐ธ ๐ผ๐๐ ๐๐ฒ๐น๐น
๐น Margin Expansion from Cost Restructuring
๐น Strategic Shift to Higher-Margin Segments
๐น Recovery in Global Trade & Industrial Activity
๐น E-commerce Tailwinds Still Intact
๐น Pricing Discipline & Network Leverage
๐น Attractive Dividend & Shareholder Returns
๐น Deleveraging and Balance Sheet Strength
๐น Potential Multiple Re-rating
๐น Managementโs Focused Capital Allocation
๐น UPS is widely regarded as a narrow-to-wide moat business
๐ช๐ต๐ฎ๐ ๐ฐ๐ฎ๐ป ๐ด๐ผ ๐๐ฟ๐ผ๐ป๐ด
๐ป 1. Slower-Than-Expected Revenue Growth
๐ป 2. Margin Pressure from Labor Costs
๐ป 3. Execution Risk in Restructuring
๐ป 4. Competitive Pressure โ Especially from Amazon & FedEx
๐ป 5. Macro and Trade Weakness
๐ป 6. Technology & CapEx Demands
๐ป 7. Potential for Multiple Compression
๐ป 8. Geopolitical & Regulatory Risks
๐ป 9. Dividend and Capital Allocation Constraints
๐ฆ๐ฒ๐ป๐๐ถ๐๐ถ๐๐ถ๐๐
If you disagree with me on certain aspects, you can choose your own assumptions using the tables below.
Base case + Bear case + Bull case
Sensitivity table
๐๐ผ๐ป๐ฐ๐น๐๐๐ถ๐ผ๐ป: Valuation suggests that the stock is trading at 16% discount to fair value. If adjusted to FV within 3 years, it will generate an annual alpha ~ 6%. From my perspective, entry is not justified, as the margin of safety is low.
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