UPS Faces an Identity Crisis
Carol Tome's first earnings call as (NYSE: UPS) CEO took place in the summer of 2020, and her guiding framework has been clear from the outset. As part of the "better not bigger" approach, UPS would focus on growing earnings by optimizing its existing network and targeting growth opportunities rather than chasing delivery volume growth. Unfortunately, recent events have brought that model into question. So, is UPS investable now? Here's the lowdown.
Tome's approach made perfect sense; by coincidence, it dovetailed perfectly with the pandemic. The long-term trend of increasing e-commerce deliveries created an excellent volume growth environment, and with Amazon.com growing its delivery capability, the environment was ripe for the transportation company to focus on growing deliveries in targeted areas. This approach is opposed to building a network to chase volume growth that might not be as profitable.
Better not bigger meant targeting end markets like small and medium-sized businesses (SMBs) and healthcare, and it also meant being willing to forgo less profitable deliveries from Amazon. Indeed, the share of UPS' revenue from Amazon fell from 13.3% in 2020 to around 11.5% in the recently reported quarter. Optimizing the existing network also led to a slowdown in capital spending, which boosted cash flow conversion from earnings.
Source Fool.com
United Parcel Service Inc. Stock
With 19 Buy predictions and only 1 Sell predictions the community sentiment for the stock is positive.
As a result the target price of 157 € shows a positive potential of 37.31% compared to the current price of 114.34 € for United Parcel Service Inc..
