United package NYSE: UPS The shares were traded at deep levels of value, offering investors the second opportunity to buy generations in five years, which was confirmed by the results of the first quarter. The results show that market fears for the quarter, although justified, were unfounded. The price correction/Q2 was an excessive reaction, which expanded the existing trend deeper to revaluation.
The price action after the release was optimistic. The market welcomed this news, revealing strong support at the April minimums, suggesting that the bottom is at hand, and the rebound is going to start. Nevertheless, uncertainty in the future can continue to interfere with the action until the end of the year, when more clarity is available. Until then, investors have time to build positions, collect 6.75% annual dividendsAnd they benefit from the impact of ransom of shares.
Significantly lower minimums are unlikely for this market for several reasons. The first is the trend in the mood of analysts. The consensus moods of analysts, according to Marketbeat, is cooled from Moderate purchase to keep In the second quarter, and the target price also fell, but the market is redeveloped. Trading is about 97 dollars, shares are on the floor of the analyst with consensus and recent changes that predict 30% growth.
The first updates after the release also correspond to this forecast, in the range from 109 to 150 dollars, and there is an assessment. Promotions are traded at a deeper discount on a wider market, almost 50%, and 8 times its EPS forecast for 2023, which is probably a low rating.
Institutional activity is another reason for the belief that the shares on believe are on or very close to its bottom. Activity reached a long -term maximum in the first quarter, contributing to the volatility of the market, but by the end of the quarter it was pure optimistic and remains like that in the second quarter. This provides a fair wind for action and a significant support base with the owner of more than 60%.
UPS provides a strong report for the first quarter
UPS had a solid quarter in the first quarter, despite a decrease in revenue by -0.9%. The decrease is mainly associated with a reduction in almost 15% in solutions of the supply chain associated with liquidation. The difference is part of the transformation plan of the company that works, and the main enterprises are growing, which contributes to 220 basic points of superiority compared to the consensus number.
The US segment grew by 1.4%, while the load and prices compensated for a slight decrease in volume, while the international segment was stronger. The international segment grew by 2.7% with an increase in 7.1% in average daily volume and, as expected, will remain stable. Nevertheless, in the future, the uncertainty for this and other transport actions increases.
Margin News is better and is central in the investment thesis. Last year, the company relied on transformation, reconfiguration and reduction of costs, and it was a timely step. The impact steadily improves the operating margin, despite the fact that it has lost a contract for Amazon and macroeconomic meetings, including an improvement in 20 B.P. In the first quarter.
A pure result is an increase in adjusted profit by 4.2%, an increase of $ 0.06 to $ 1.49 by US and almost 800 b. It is expected that the margin will continue to improve during the year, and the financial director Brian Dike plans to reach a target of $ 3.5 billion by the end of the year.
UPS capital return has a significant impact for investors
UPS capital profitability is significant. It includes dividends and ransom of shares, which reduced the calculation by about 0.8% in annual calculus in the first quarter. As of the end of April, dividends cost more than 6% in annual profitability, and this is a reliable payment with a payment coefficient of about 60%.
The balance reflects the influence of refusal, including a decrease in capital. Nevertheless, it remains healthy, with a low lever relative to both promotions and assets, therefore, an increase in the distribution can also be expected. UPS may not increase its distribution aggressively this year, but the increase will probably continue in the foreseeable future.
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