The multi-decade high inflation and the Fed’s consecutive rate hikes have raised the odds of a recession. Amid declining demand, the shipping industry is now dealing with the problem of too many containers.
According to a Container xChange spokeswoman, “there is a significant dent in consumer demand which then leads to less demand for freight and cargo, and therefore, a proportionate dent in container demand globally.”
However, the U.S. Department of Transportation recently announced more than $703 million for advancing port facilities across 22 states and one territory through the Maritime Administration’s Port Infrastructure Development Program. This investment is expected to boost the domestic shipping industry. Moreover, increasing trade agreements across nations are benefiting the industry.
Moreover, investors’ interest in shipping stocks is evident from the SonicShares Global Shipping ETF’s (BOAT) 7.7% gain over the past month.
United Parcel Service, Inc. (UPS)
UPS offers letter and package delivery, transportation, logistics, and related services. It operates through two segments: U.S. Domestic Package and International Package.
On October 25, 2022, Carol Tomé, UPS’ CEO, said, “the macro environment is very dynamic, but we are on track to achieving our 2022 financial targets by executing our strategy and controlling what we can control.”
In terms of forward non-GAAP P/E, UPS is currently trading at 14.06x, 18.2% lower than the industry average of 17.18x. The stock’s forward Price/Cash Flow multiple of 10.88 is 18.6% lower than the industry average of 13.37.
UPS’ EBIT margin of 13.68% is 40.6% higher than the 9.73% industry average. Its EBITDA margin of 16.70% is 28.3% higher than the 13.02% industry average.
UPS’ revenue increased 4.2% year-over-year to $24.16 billion for the third quarter that ended September 30, 2022. Its operating profit came in at $3.11 billion, up 7.5% year-over-year. Moreover, Its EPS came in at $2.96, up 11.7% year-over-year.
Analysts expect UPS’ revenue to increase 4.3% year-over-year to $101.46 billion in 2022. Its EPS is estimated to grow 6.6% year-over-year to $12.93 in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past month, the stock has gained 12.2% to close the last trading session at $181.47.
UPS has an overall rating of B, translating to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
UPS has an A grade for Quality and a B for Stability and Sentiment. It is ranked #6 out of 17 stocks in the A-rated Air Freight & Shipping Services industry. Click here for the additional POWR Ratings for Growth, Momentum, and Value for UPS.
Universal Logistics Holdings, Inc. (ULH)
ULH provides transportation and logistics solutions in the United States, Mexico, Canada, and Colombia. The business engages in the trucking; intermodal; logistics; and brokerage segments.
In terms of forward Price/Book, ULH is currently trading at 2.28x, 15.6% lower than the industry average of 2.70x. The stock’s forward Price/Sales multiple of 0.50 is 62.3% lower than the industry average of 1.32.
ULH’s EBIT margin of 10.67% is 9.7% higher than the 9.73% industry average. Its EBITDA margin of 14.33% is 10% higher than the 13.02% industry average.
ULH’s operating revenues increased 13.5% year-over-year to $505.69 million for the third quarter that ended October 1, 2022. Its operating profit came in at $48.48 million, up 371.9% year-over-year. Moreover, Its EPS came in at $1.84, up 384.2% year-over-year.
ULH’s revenue is expected to increase 15.3% year-over-year to $2.02 billion in 2022. Its EPS is estimated to grow 135.4% year-over-year to $6.45 in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 81.7% to close the last trading session at $38.33.
ULH has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system. It has an A grade for Growth and a B for Value, Momentum, Sentiment, and Stability.
ULH is ranked first in the Air Freight & Shipping Services industry. Click here for the additional POWR Ratings for ULH (Quality).
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UPS shares were trading at $178.90 per share on Wednesday morning, down $2.57 (-1.42%). Year-to-date, UPS has declined -13.77%, versus a -15.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...
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