Should You Invest in UPS?

PHOTO CREDIT: UPS

OVERVIEW

United Parcel Services Incorporation (UPS) is a company based in the United States. The company offers logistics and transportation services for different kinds of packages, freight, and cargo around the world. The company offers services to transport things like freight, healthcare products, e-commerce packages, and many others. The company was founded in 1907.

Why You Should?

1. UPS is a great reopening play in an investor’s portfolio. As people start to go back out and earn more money, they are more likely to order stuff online. In addition to this, UPS will see higher volumes from industrial customers who need freight and cargo to be transported. This will benefit the company and its investors.
2. The COVID-19 pandemic has also helped the company in the short and mid-term as people bought more stuff online instead of going to stores. In addition to this, the pandemic has further accelerated the shift to e-commerce as people find it more convenient to purchase goods online. This means that package volumes from e-commerce will be higher.
3. UPS has played a critical part in the transportation of COVID-19 vaccines around the world. It has utilized its vast network of processing centers, trucks, vans, and airplanes to get vaccines to where they need to be. This has helped the company boost volume in one of its most profitable businesses, healthcare logistics/transport. This will also benefit investors.
4. UPS continues to innovate in the logistics and cargo transportation industry in order to increase productivity and reduce costs. For example, the company is purchasing thousands of electric delivery vans, which help the company reduce costs. Drones to deliver small packages will also help the company achieve its goals. This will benefit the company and its investors.

Why You Should Not?

1. The company faces tough competition in the transportation and logistics industry. Some of these competitors include FedEx, the USPS, Amazon, and many others. This competition might hurt the company and its investors in the future.
2. In the company’s most recent quarter, the company reported a drop in the Ground and Domestic package volumes, which primarily consisted of e-commerce packages. Because of this, the stock tanked as the company delivered mediocre guidance for the rest of the year. This slowing growth in the short term might hurt the company and its investors in the future.
3. UPS also faces tough competition from Amazon, the world’s largest e-commerce company as it starts to deliver its own packages. Amazon has been investing heavily in logistics as it invests in new trucks, vans, distribution centers, and planes. I would not be surprised if Amazon starts to offer more traditional logistics services to companies around the world.

MY OPINION

I think that UPS is a decent long-term investment due to its position as a good reopening play, positive impacts from the pandemic, healthcare transportation, as well as continued innovation. However, tough competition, slowing growth, as well as Amazon might hurt the company and its investors in the future.