Sticking With UPS

NEW YORK ( TheStreet) -- My heart skips a beat whenever the brown truck from United Parcel Service ( UPS) pulls up in front of my house to deliver a package. As more and more consumers order everything from books to food to electronic devices online, UPS appears poised to sustain and grow its lucrative business.

Yes, I'm aware the company said last Friday it anticipates fourth-quarter 2013 diluted earnings per share of $1.25. Full-year 2013 adjusted diluted earnings per share are expected to be $4.57, below the previous guidance of $4.65 to $4.85. On a reported basis, 2013 diluted earnings are expected to be $4.61 per share. This information came from the company's investor relations Web site, which I encourage you to peruse.

The financial results in the U.S. were negatively affected by the combination of a shortened peak shopping season and an unprecedented level of online shopping that included a surge of last-minute orders. In an effort to maintain service standards and commitments, UPS deployed additional equipment and people. For example, the company utilized 85,000 temporary employees, 30,000 more than planned. Also, December weather had an effect and hurt earnings results.

That's a good part of the reason the stock price has corrected from its Dec. 31 high of $105.37 to Tuesday's intra-day low of $97.54. For you home-gamers that's a 7.42% correction, and who knows if the price might correct a little more before resuming an upward trajectory. UPS shares closed Tuesday at $98.57, down 6.2% for the year to date.

How Many Packages Can UPS Deliver Two Days Before Xmas?

To give us a sense of the capacity that UPS can handle during its highest seasonal delivery requirements, I  visited its Web site. I learned that on Dece. 23, UPS delivered more than 31 million packages, the most ever and 13% over the prior-year peak day. This year's highest delivery day occurred six days later than anticipated and was 7.5% greater than the company had prepared for. No wonder it needed to hire so many temporary workers.

As an analyst, I'll cut UPS some slack on lowering its guidance for its fourth-quarter EPS. Despite its fourth-quarter challenges and results, the company is confident of its 2014 outlook. UPS expects full-year 2014 diluted earnings per share to grow in line with its long term targets of 10% to 15%, compared to 2013 adjusted results. Further details will be provided when the company releases earnings on Jan. 30.



It has been a robust year for UPS investors as the one-year chart below illustrates convincingly.

UPS Chart
UPS
data by YCharts

The company's quarterly diluted year-over-year EPS growth has been sensational, which reflects the visionary leadership of the officers of UPS, especially that of CEO D. Scott Davis. According to Yahoo! (YHOO) Finance, Davis owned 296,903 shares of his company as of Nov. 11, 2013.

To the best of my knowledge and research, the CEO of UPS still owns that treasure trove of stock as of Jan. 2, 2014, so his money is where his heart is in a big way. After all, even after a reduced share price of around $98, it pays to keep holding UPS because of its 2.53% dividend payout and upside potential.

Perhaps the dividend will be at least sustained (better yet increased) after CEO Davis and CFO Kurt Kuehn discuss fourth-quarter results with investors and analysts during the Jan. 30 conference call, at 8:30 a.m. ET.

Is Now an Opportune Time to Buy UPS Stock?

When you own shares of UPS you're investing in a company that is a global leader in logistics, offering a broad range of solutions for the transportation of packages and freight, including innovative delivery options for the global consumer market; the facilitation of international trade, and the deployment of advanced technology to more efficiently manage the world of business.

That's part of the reason so many analysts like it enough to place an average one-year target price on UPS stock at nearly $110, which from my research is quite likely to remain barring any unforeseen quarterly setbacks in its growth plan.

If you're like me and you don't own any UPS yet, or you're thinking about buying more shares, consider what Jim Cramer thinks: "One of my core principles in Get Rich Carefully [Jim's new book] comes right out of my lessons learned from my charitable trust: 'Not all estimate cuts are harbingers of bad things to come. Some of them signal investable bottoms.'"

Jim said one of those "investable bottoms" may have been last Friday when the shares of UPS hit an intraday low of $97 on very heavy volume before rebounding somewhat.

If you prefer exposure to UPS through the ownership of an exchange-traded fund you might want to consider the iShares Transportation Average ETF (IYT), which holds over 7% of the fund in UPS shares and over 9% in its main rival FedEx (FDX). IYT surged to a 52-week high on Tuesday of $134.50 before closing at $133.63.

However you decide to invest in it, UPS still remains a buy and if it re-tests last Friday's low it will be an even better entry price. Compared to the paltry dividend FDX pays, UPS proves itself an investor-friendly company that pulls out all stops to make its customers and shareholders as happy as possible.

At the time of publication the author had no positions in the companies mentioned in this article.



This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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Marc Courtenay is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor of www.ChecktheMarkets.com.

Courtenay holds a Master's of Science degree in Psychology from California Polytechnic State University, and is a former senior vice-president of Investments for two major brokerage firms. He's been a fiercely independent investment "investigator" and a consulting contributor to the investment publishing world for over 30 years. In addition to his role as an investment publisher and analyst, he serves as a marketing consultant to the investment media industries.

In his role as a financial writer and editor, he specializes in unique investment strategies, growth with income stocks, overlooked investment themes, tax-advantaged themes, risk management, technologies to capture gains and reduce losses, real estate related opportunities,effective wealth preservation techniques, and the use of ETFs for diversification and asset allocation. He also follows and frequently writes about technology, health sciences, energy and resource companies. Because of his training and background in Clinical Counseling and Psychology, he enjoys writing about investor behavior, the herd mentality, how to turn investment mistakes into investment breakthroughs and the stock market's behavioral trends and patterns.

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