Few companies can claim a title to being able to provide investors with a view of the global economy. Global shipping companies are such companies. They can tell when volume is up or down, determine the impact of changing fuel costs, and other measures.
With United Parcel Service (UPS) looking to rebrand, the company is also looking at substantial growth as the global economy continues to recover.
The company’s latest revenue estimates are for nearly $102 billion by the end of 2023. That’s the good news. The bad news? Company margins are being squeezed, as higher input costs are lowering the margin per package shipped.
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Investors were dour on the company’s latest three-year plan, announced this week. That’s put shares down to about 20 times forward earnings, a reasonable valuation for shares.
Action to take: Investors may like shares, as the company yields just under 2 percent right now, but has a history of raising its dividend over time. Ideally, UPS is one of a handful of companies investors should buy during bear markets every few years, as valuations will be even better and returns are likely in time.
The drop in shares following the company’s announcement took the stock off overbought levels, and in intraday trading shares bounced as they hit the 50-day moving average. Those signs are still bullish over the long term. The October $210 calls, going for about $775, look attractive here for mid-to-high double-digit profits.
Disclosure: The author of this article has no position in the stock mentioned here, but may make a trade this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.