United Parcel Service (UPS - Free Report) is performing impressively at the moment. Also, we are optimistic about the company’s prospects and believe that the time is right for investors to add the stock to their portfolio as it looks promising and is poised to carry the momentum ahead.
Let’s take a look into the factors that make this Zacks Rank #2 (Buy) stock a compelling choice for investors right now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
An Outperformer: UPS has outperformed its industry on a year-to-date basis. The stock has gained 22% compared with the industry’s 9.4% growth.
Earnings Estimates Moving Up: Annual estimates for UPS have been northward bound over the past 90 days, reflecting analysts’ confidence in the stock. Over this period, the Zacks Consensus Estimate for current-year earnings has been revised upward to the tune of 4 cents to $7.5. For 2020, the consensus mark has climbed 2 cents to $8.06 over the same time frame.
Given the wealth of information at their disposal, it is in the best interest of investors to be guided by broker advice and the direction of their estimate revisions. This is because the direction of estimate revisions serves as an important pointer when it comes to the price of a stock.
Solid Growth Prospects: The Zacks Consensus Estimate for UPS’ current-year earnings indicates a 3.6% improvement year over year. In 2020, the bottom line is anticipated to register 7.5% growth. The stock’s earnings growth rate for three to five years is projected at 9.4%.
The scenario is bullish with respect to revenues as well. For 2019, the Zacks Consensus Estimate for the company’s top line stands at $74.30 billion, implying 3.4% growth from the year-ago reported figure. For 2020, the consensus mark is pinned at $77.64 billion, reflecting a 4.5% improvement year over year.
Decent Earnings Surprise History: UPS has an impressive earnings surprise history. The company has outpaced the Zacks Consensus Estimate in two of the trailing four quarters, the average earnings beat being 0.3%.
Style Scores: In addition to a favorable Zacks Rank and bullish industry rank, the stock has a Momentum Score of B and VGM Score of A. Here, V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of all three scores.
Key Growth Drivers: UPS has been gaining significantly from solid e-commerce growth over the past few quarters. The trend is likely to continue as the company anticipates cross-border e-commerce volume to grow by 28% during the 2019-2021 period. Moreover, its partnership with e-commerce firm Inxeption, inked in March 2019, is aimed at simplifying business to business (B2B) logistics. According to market research firm Forrester, B2B e-commerce, a fast-evolving market, is expected to reach $1.8 trillion by 2023. The deal inked with Clean Energy Fuels this May to buy 170 million gallon equivalents of renewable natural gas through 2026 is an added positive.
These apart, UPS’ efforts to reward its investors are commendable. UPS paid approximately $1.7 billion as dividend apart from buying back 4.8 million shares for $500 million in the first half of 2019. Also, in February 2019, UPS raised its quarterly dividend by 5.5% to 96 cents per share.
Moreover, UPS, like rival FedEx (FDX - Free Report) , is leaving no stone unturned to achieve a record-setting peak shipping season. To this end, UPS intends to hire 100,000 seasonal employees, anticipating a significant expansion in package volumes during the November 2019-January 2020 period. UPS expects daily package deliveries to nearly double its per day average of 20 million. A successful holiday season would add another feather to UPS’ cap.
Other Key Picks
Investors interested in the Zacks Transportation sector may consider stocks like GATX Corporation (GATX - Free Report) and SkyWest, Inc. (SKYW - Free Report) , each carrying a Zacks Rank of 2. Shares of GATX and SkyWest have gained in excess of 11% and 32%, respectively, so far this year.
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