UPS -- United Parcel Service

[lincolnc]

Starting a a thread here.

 

Not sure it is absolutely "cheap" but trading close to October 2014 levels. 

 

FDX has outperformed since October, but essentially a duopoly domestically (excluding the venerable US Postal Service).

 

Currently trading at 16x CY 2015E.

[spark411]

I bought UPS when Lou Simpson bought it.  I'm a cloner.    Recently Gates bought it has well.

 

From a moat standpoint, the business is a duopoly and UPS has pricing power.  UPS is essential in the e-commerce value chain.  I think this is why Gates is in it.  I think some of the profits that used to go to retailers are going to UPS and FDX and thus both companies will continue to grow profits.    My expectation is about 10% returns with EPS growing 7-10%  and dividends at 3%.

 

Some things I don't like about the business is that the P/E is high.    Also, I don't know about the new CEO i.e. does he know how to grow the business like the founder of the company ie Fred Smith at Fedex. 

 

Am eager to hear what others think.

 

Thanks

 

Sang

[Guest Schwab711]

I bought UPS when Lou Simpson bought it.  I'm a cloner.    Recently Gates bought it has well.

 

From a moat standpoint, the business is a duopoly and UPS has pricing power.  UPS is essential in the e-commerce value chain.  I think this is why Gates is in it.  I think some of the profits that used to go to retailers are going to UPS and FDX and thus both companies will continue to grow profits.    My expectation is about 10% returns with EPS growing 7-10%  and dividends at 3%.

 

Some things I don't like about the business is that the P/E is high.    Also, I don't know about the new CEO i.e. does he know how to grow the business like the founder of the company ie Fred Smith at Fedex. 

 

Am eager to hear what others think.

 

Thanks

 

Sang

 

I wouldn't be so quick to write off the largest competitor in the industry, USPS. I do love the industry do to the complexities of supply chain and logistics management (not likely to see new entrants) and the continued trend of more deliveries. Pricing power is probably not as strong as you think because USPS doesn't answer to shareholders (and congress is already used to losses).

 

I prefer FDX however because they have a higher % of revenues from business accounts where they can compete with USPS on price (I would double-check this, just going by memory).

 

http://www.consumerreports.org/cro/news/2014/12/shipping-comparison-fedex-vs-ups-vs-us-postal-service/index.htm

http://online-shipping-blog.endicia.com/fedex-ups-usps-shipping-rates-comparison-chart-2015/

[spark411]

Thank you Schwab711.    I did not consider USPS as a competitor, but I definitely should.

 

I've been trying to figure out why Lou Simpson likes this stock.  I get how UPS benefits from the network effect, has shareholders that act as owners vs. renters, and e-commerce growing.    I'm also thinking Lou Simpson likes UPS because of the high pension liability i.e. if interest rates go up, the pension liability decreases and earnings rise.    Even with this, the P/E is so high.  He recently sold shares of UPS so I'm wondering if he looks at this investment as a mistake.      Anybody see anything else in UPS that is unique for a value investor?

[Jurgis]

I ordered a six pack of juice in glass containers from Amazon 3rd party. UPS ground got this damaged-returned-to-sender five times in a row. From 4 different senders. I guess I should not care since I get refund from Amazon and someone (UPS?) is eating the cost. I just want my juice.  :'(

 

#FML #FWP

[mbreject]

I don't think Simpson has held this for a while now.

[sleepydragon]

My wife was ordering some produce from a farm. The produce is packed in dry ice and usually stay on the road for less than  48hrs.

The farm used to use Fedex. Had no problem.

Recently they switched to UPS, probably cost less for them.

The UPS driver is awful. When it was raining outside, he would drive to my house, park there for 5 minutes and then left without delivering! He didn’t want to get wet in the rain, I guessed. Next day at 5pm. He showed up again, and it was sunny, he delivered package. But everything has gone bad.

 

And today I was walking on the side of a small road, and a UPS driver repeated pressed his horn on me. The guy was driving like 40 mph on a 15 mph road.