Shares of the shipping giant fell after receiving a rare sell rating, as concerns grew over increasing competition from Amazon and FedEx. Analysts pointed to mounting pressure from Amazon’s evolving logistics capabilities and FedEx’s non-unionized workforce, which could challenge UPS’s market position.
Price Movement
The share price of United Parcel Service, Inc.(UPS), listed in Nasdaq, dropped 3.4 percent on Monday, to 131.33 USD from its previous close of 135.92 USD. Year-to-date, the stock has fallen by 17 percent.
What happened
Barclays has downgraded United Parcel Service Inc. (UPS) to a rare “sell” rating, citing concerns over near-term earnings risks and long-term challenges. Analyst Brandon Oglenski highlighted weakening parcel demand and potential fallout from a reduced relationship with Amazon, alongside intensifying competition from FedEx.
Additionally, UPS faces headwinds from non-unionized FedEx rivals and limited dividend growth, creating a tough outlook for the shipping giant as it heads toward its third-quarter earnings report later this week.
UPS is set to release its third-quarter earnings on Thursday, following FedEx’s recent warning of a business slowdown. Both companies face challenges from customers opting for slower, cost-saving delivery options.
Barclays analyst highlights Amazon as a long-term “threat” to UPS, given its massive delivery network and status as UPS’s largest customer. He notes that as UPS focuses on boosting U.S. profitability, pricing strategies could push Amazon to in-source more deliveries. FedEx’s merged Express and Ground operations also pose a long-term risk to UPS shares.
Delivery Business Overview
UPS delivers approximately 22.3 million packages daily and operates in over 200 countries and territories. The company serves 1.6 million shipping customers and provides delivery services to 10.2 million customers each day.
Services Offered
UPS offers a variety of services, including reliable package delivery options for both domestic and international shipments. The company also provides comprehensive supply chain solutions that cover warehousing, transportation, and distribution.
Additionally, UPS operates one of the largest fleets of alternative fuel vehicles, enhancing its commitment to sustainability.
Financial Performance
In its latest financial update, the company reported net sales of $90,958 Million in the year ended December 2023, reflecting a 10 percent decrease from $100,338 Million in the year ended December 2022. EPS (Earning Per Share) also declined 21 percent to 6.14, compared to 7.81 in the same period.
Company Profile
United Parcel Service, Inc. is a global leader in package delivery and supply chain management solutions. Founded in 1907 as a small messenger service, UPS has evolved into one of the largest logistics companies worldwide.
Written by – Siddesh S Raskar
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