We recently issued an updated report on United Parcel Service, Inc. (UPS - Free Report) .
The surge in e-commerce sales during the coronavirus pandemic is a huge positive for UPS. Notably, the need for door-to-door delivery of essentials is rising thanks to pandemic-induced social-distancing protocols, quarantine and lockdowns. Moreover, UPS' decision to impose peak delivery surcharge on companies (Amazon, Best Buy etc) responsible for surge in shipments including oversize items that are testing delivery networks, is aimed at controlling costs. This will boost the bottom line.
Moreover, UPS’ liquidity position is impressive. The company exited the March quarter with cash and equivalents of $9,460 million, above its current debt figure of $4,931 million. This suggests that it has enough cash to meet its current debt obligations.
Nevertheless, sluggish air freight market due to below par demand from China is a negative as UPS has significant exposure in China. Due to uncertainties related to the pandemic, the company withdrew its previously-issued 2020 projections for revenues and earnings per share. Moreover, capital expenditures for 2020 are expected to be lowered by nearly $1 billion from the previous projection, which might dent long-term growth.
Zacks Rank & Key Picks
UPS currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Transportation sector are Canadian Pacific Railway Limited (CP - Free Report) , TFI International (TFII - Free Report) and Teekay Tankers Ltd. (TNK - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings (three to five years) growth rate for Canadian Pacific, TFI International and Teekay Tankers is estimated at 7.5%, 4.1% and 3%, respectively.
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