We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
UPS Strong on E-commerce, Payouts & Buybacks, Bears High Costs
Read MoreHide Full Article
United Parcel Service (UPS - Free Report) is being aided by the strong e-commerce environment, despite economies reopening. Moreover, efforts to reward its shareholders through dividends and buybacks underline its financial strength. However, high operating expenses and supply-chain woes represent major headwinds. Currently, UPS carries a Zacks Rank #3 (Hold).
We are encouraged by UPS' solid free cash flow. In 2019, UPS generated adjusted free cash flow in excess of $4.1 billion. Even in the coronavirus-hit scenario, UPS generated an impressive free cash flow of $5.1 billion in 2020. In 2021, the amount more than doubled to $10.9 billion. In first-quarter 2022, free cash flow increased 5.5% to $3.9 billion. The metric is expected to be around $9 billion in 2022.
Robust free cash-flow generation by UPS is a major positive and leads to an uptick in its shareholder-friendly activities. Notably, UPS paid out dividends worth $3,437 million in 2021, up 1.9% year over year. In 2021, UPS repurchased shares worth $500 million, up 130% year over year. UPS aims to reward its shareholders with $7.2 billion in 2022 through dividends ($5.2 billion) and share buybacks ($2 billion).
The agreement inked with ESW in March 2022 is an added positive. The deal aims to capitalize on the growing popularity of cross-border e-commerce. Despite economies reopening, the thirst for online shopping is rampant among consumers. E-commerce growth is likely to bolster UPS’ top line. We are also impressed with UPS' environmentally-friendly approach.
However, the increase in operating expenses is concerning and denting bottom-line growth. For example, operating costs escalated 9.7% in 2021. Due to the 51.2% increase in fuel expenses, operating costs increased 4.9% in first-quarter 2022. Due to high fuel costs, operating expenses are likely to shoot up in second-quarter 2022 as well.
Also, supply chain-led challenges may hurt UPS' performance in the coming days. Apart from supply-chain issues, headwinds like COVID-led bottlenecks, inflationary pressures and labor shortages are weighing on the stock.
Ryder has a trailing-four quarter surprise of 48.2%, on average, with its earnings having surpassed the Zacks Consensus Estimate in all the last four quarters.
R is benefiting from improving economic and freight conditions in the United States. Revenues in all segments grew (on higher rental revenues, new business and favorable pricing) in first-quarter 2022. R currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term (three-to-five years) expected earnings per share growth rate for C.H. Robinson is pegged at 9%. Improving freight market conditions are aiding CHRW. In first-quarter 2022, the top line improved 41.8% owing to favorable truckload pricing for customers and handsome profits in ocean freight.
Driven by the positives, the stock has rallied 12.2% in the past year. CHRW currently sports a Zacks Rank of 1.
GATX has a trailing-four quarter surprise of 40.1%, on average, with its earnings having surpassed the Zacks Consensus Estimate in all the last four quarters. The gradual improvement in the North American railcar leasing market is a huge positive for GATX.
Driven by the upsides, the stock has risen 6.7% in the past year. GATX currently has a Zacks Rank of 1.
See More Zacks Research for These Tickers
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
UPS Strong on E-commerce, Payouts & Buybacks, Bears High Costs
United Parcel Service (UPS - Free Report) is being aided by the strong e-commerce environment, despite economies reopening. Moreover, efforts to reward its shareholders through dividends and buybacks underline its financial strength. However, high operating expenses and supply-chain woes represent major headwinds. Currently, UPS carries a Zacks Rank #3 (Hold).
We are encouraged by UPS' solid free cash flow. In 2019, UPS generated adjusted free cash flow in excess of $4.1 billion. Even in the coronavirus-hit scenario, UPS generated an impressive free cash flow of $5.1 billion in 2020. In 2021, the amount more than doubled to $10.9 billion. In first-quarter 2022, free cash flow increased 5.5% to $3.9 billion. The metric is expected to be around $9 billion in 2022.
Robust free cash-flow generation by UPS is a major positive and leads to an uptick in its shareholder-friendly activities. Notably, UPS paid out dividends worth $3,437 million in 2021, up 1.9% year over year. In 2021, UPS repurchased shares worth $500 million, up 130% year over year. UPS aims to reward its shareholders with $7.2 billion in 2022 through dividends ($5.2 billion) and share buybacks ($2 billion).
The agreement inked with ESW in March 2022 is an added positive. The deal aims to capitalize on the growing popularity of cross-border e-commerce. Despite economies reopening, the thirst for online shopping is rampant among consumers. E-commerce growth is likely to bolster UPS’ top line. We are also impressed with UPS' environmentally-friendly approach.
However, the increase in operating expenses is concerning and denting bottom-line growth. For example, operating costs escalated 9.7% in 2021. Due to the 51.2% increase in fuel expenses, operating costs increased 4.9% in first-quarter 2022. Due to high fuel costs, operating expenses are likely to shoot up in second-quarter 2022 as well.
Also, supply chain-led challenges may hurt UPS' performance in the coming days. Apart from supply-chain issues, headwinds like COVID-led bottlenecks, inflationary pressures and labor shortages are weighing on the stock.
Stocks to Consider
Some better-ranked stocks in the broader Zacks Transportation sector are Ryder System (R - Free Report) , C.H. Robinson Worldwide (CHRW - Free Report) and GATX Corporation (GATX - Free Report) .
Ryder has a trailing-four quarter surprise of 48.2%, on average, with its earnings having surpassed the Zacks Consensus Estimate in all the last four quarters.
R is benefiting from improving economic and freight conditions in the United States. Revenues in all segments grew (on higher rental revenues, new business and favorable pricing) in first-quarter 2022. R currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term (three-to-five years) expected earnings per share growth rate for C.H. Robinson is pegged at 9%. Improving freight market conditions are aiding CHRW. In first-quarter 2022, the top line improved 41.8% owing to favorable truckload pricing for customers and handsome profits in ocean freight.
Driven by the positives, the stock has rallied 12.2% in the past year. CHRW currently sports a Zacks Rank of 1.
GATX has a trailing-four quarter surprise of 40.1%, on average, with its earnings having surpassed the Zacks Consensus Estimate in all the last four quarters. The gradual improvement in the North American railcar leasing market is a huge positive for GATX.
Driven by the upsides, the stock has risen 6.7% in the past year. GATX currently has a Zacks Rank of 1.