UPS valuation lags peers amid Amazon competition
UPS shares remain undervalued compared to FedEx and DHL despite raising guidance, as Amazon competition erodes its domestic package volume. The company carries $25 billion in debt and will not raise its dividend for the first time in 16 years.
UPS reported a 7% revenue increase and raised its guidance, but its stock remains significantly undervalued compared to peers. The company's market cap has fallen from $200 billion in 2022 to under $90 billion, a level lower than in 2013, while FedEx and DHL trade near record highs. UPS derives two-thirds of its revenue from domestic US packages, a segment where its largest customer, Amazon, now delivers more packages itself than UPS does. UPS has halved its Amazon volume, cut thousands of jobs, and closed over 100 locations.
Unionized drivers earn approximately $145,000 annually including benefits. UPS carries $25 billion in debt and pays a dividend yield over 6%, though it will not raise the dividend for the first time in 16 years, currently paying out about 90% of expected earnings. The stock trades at 13 times expected earnings, compared to a 10-year average of 16 times and 16 times for FedEx and DHL. This valuation gap reflects investor concerns about the long-term sustainability of UPS's business model in the face of increasing competition from Amazon and other logistics providers.