United Parcel Service Inc.UPS

Morningstar Rating

Stock Research and Analysis

by Keith Schoonmaker

United Parcel Service has crafted a wide economic moat by assembling a dense integrated global shipping network that's unlikely to be matched by any but a few global players. This substantial barrier to entry is buttressed by high customer satisfaction Read more

Bulls Say

UPS is the largest player in a business where network size matters, both in reaching most recipients on the planet and in spreading costs over a larger volume of packages.

In addition to volume growth, the firm benefits from steadily increasing prices because UPS and other integrated shippers practice rational pricing.

UPS uses the same assets to handle express and ground shipments, earning greater margins and returns on assets compared with other air freight shippers.

DHL's exit from the domestic U.S. delivery market demonstrates the powerful barriers to entry UPS and FedEx have established with their extensive networks and customer base.

UPS has consistently increased revenue and operating profit during the past decade. Read more

Bears Say

UPS and its competitors are subject to risk of a downturn in the global economy.

New entrants are unlikely, but several existing capable, albeit less profitable, competitors vie for the parcel shipping business of UPS clients.

UPS' less-than-truckload shipping segment exposes the firm to a market in which slowing demand for freight shipping leads asset-intensive competitors to bid rates down to thin margins. Read more

Strategy

Efficient and customer-friendly drivers, motivated by equity ownership of the firm, are a vital link in UPS strategy. The firm invests in new businesses, such as less-than-truckload and retail operations, Read more

Management

Overall, UPS has excellent corporate-governance policies, and management has done right by shareholders. Chairman and CEO D. Scott Davis advanced from the CFO post to take the reins in January 2008. That year, Davis was paid a base salary of $960,000 Read more

Profile

UPS is the world's largest package delivery company, using a fleet of over 500 planes and 100,000-plus vehicles to deliver 4 billion packages annually to residences and Read more

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