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Here's Why Investors Should Hold UPS Stock in Portfolio Now
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United Parcel Service, Inc. (UPS - Free Report) is benefiting from solid free cash flow. However, rising expenses are headwinds.
Let’s delve deeper.
Factors Working in Favor of UPS
We are encouraged by UPS' solid free cash flow. In the first nine months of 2023, it generated free cash flow of $4.9 billion despite the uncertain scenario. Robust free cash-flow generation by the company is a major positive and is leading to an uptick in shareholder-friendly activities.
Notably, UPS paid dividends worth $4 billion in the first nine months of 2023. In the same period, it repurchased shares worth $2.25 billion.
In 2023, the company’s board of directors has raised its quarterly cash dividend to $1.62 per share. This was the 14th consecutive year of a dividend hike. Additionally, it has approved a $5-billion share repurchase authorization, replacing the company’s existing authorization. For full-year 2023, management expects making dividend payments of $5.4 billion.
In August 2023, UPS received encouraging tidings on the labor front when thousands of its workers, represented by International Brotherhood of Teamsters, approved a five-year deal aimed at bettering pay and working conditions for the unionized workers. Teamsters represents 34,000 pilots of UPS. 86% of voting members cast their votes in favor of the deal.
Factors Ailing UPS
Rising capital expenses are its major woes. In 2022, UPS incurred $4,769 million of capital expenditures, up 13.7% year over year. The company now expects current-year capital expenditures to be $5.3 billion, well above 2022 levels. The elevated capex guidance, even though aimed at long-term benefits, may dent current-year profit margins.
RYAAY, which currently carries a Zacks Rank #2 (Buy), is benefiting from buoyant air-traffic scenario post Covid. Traffic grew 11% to 105.4 million during the first half of fiscal 2024. On the back of robust traffic scenario, RYAAY’s profit after tax was €2.18 billion during the first half of fiscal 2024, up 59% year over year. Ryanair expects fiscal 2024 traffic to be 183.5 million.
SKYW's fleet modernization efforts are commendable. SKYW currently sport a Zacks Rank #1 (Strong Buy). Initiatives to reward its shareholders also bode well. The Zacks Consensus Estimate for 2024 earnings increased 3.5% in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Here's Why Investors Should Hold UPS Stock in Portfolio Now
United Parcel Service, Inc. (UPS - Free Report) is benefiting from solid free cash flow. However, rising expenses are headwinds.
Let’s delve deeper.
Factors Working in Favor of UPS
We are encouraged by UPS' solid free cash flow. In the first nine months of 2023, it generated free cash flow of $4.9 billion despite the uncertain scenario. Robust free cash-flow generation by the company is a major positive and is leading to an uptick in shareholder-friendly activities.
Notably, UPS paid dividends worth $4 billion in the first nine months of 2023. In the same period, it repurchased shares worth $2.25 billion.
In 2023, the company’s board of directors has raised its quarterly cash dividend to $1.62 per share. This was the 14th consecutive year of a dividend hike. Additionally, it has approved a $5-billion share repurchase authorization, replacing the company’s existing authorization. For full-year 2023, management expects making dividend payments of $5.4 billion.
In August 2023, UPS received encouraging tidings on the labor front when thousands of its workers, represented by International Brotherhood of Teamsters, approved a five-year deal aimed at bettering pay and working conditions for the unionized workers. Teamsters represents 34,000 pilots of UPS. 86% of voting members cast their votes in favor of the deal.
Factors Ailing UPS
Rising capital expenses are its major woes. In 2022, UPS incurred $4,769 million of capital expenditures, up 13.7% year over year. The company now expects current-year capital expenditures to be $5.3 billion, well above 2022 levels. The elevated capex guidance, even though aimed at long-term benefits, may dent current-year profit margins.
Zacks Rank & Key Picks
UPS currently carries a Zacks Rank #3 (Hold).
Investors interested in the Zacks Transportation sector may consider better-ranked stocks like Ryanair Holdings (RYAAY - Free Report) and SkyWest (SKYW - Free Report) .
RYAAY, which currently carries a Zacks Rank #2 (Buy), is benefiting from buoyant air-traffic scenario post Covid. Traffic grew 11% to 105.4 million during the first half of fiscal 2024. On the back of robust traffic scenario, RYAAY’s profit after tax was €2.18 billion during the first half of fiscal 2024, up 59% year over year. Ryanair expects fiscal 2024 traffic to be 183.5 million.
SKYW's fleet modernization efforts are commendable. SKYW currently sport a Zacks Rank #1 (Strong Buy). Initiatives to reward its shareholders also bode well. The Zacks Consensus Estimate for 2024 earnings increased 3.5% in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.