UPS Offers Investors Shelter From Coronavirus Rout, Analyst Says
February 28 2020 - 03:56PM
Dow Jones News
By Paul Ziobro
United Parcel Service Inc. shares look like a safe place to ride
out the Coronavirus outbreak, say Citigroup transportation
analysts, partly as more people may hunker down and shop more
online.
The firm believes that UPS shares, down more than 13% this month
compared with a 9% decline for the S&P 500, "have overshot to
the downside in the context of Coronavirus fears."
One saving grace for UPS is its large exposure to ecommerce,
including getting 11.6% of revenue from Amazon.com Inc. The firm
notes the trend toward more people shopping online "is somewhat
immune from cyclical economic forces and arguably would see growth
in a scenario in which U.S. consumers worry about congregating in
public spaces, such as grocery stores and shopping malls."
The firm sees other reasons to find shelter at UPS. As
production starts picking up in China, that could mean a rush of
goods that need to get to warehouses, factories and shelves
quickly, benefitting the delivery giant's freight forwarding
business.
UPS's dividend is also yielding about 4.5%, which is both close
to historical highs and a wide spread to treasury yields.
UPS does expect to see a quick rebound in China as production
picks up. "We are prepared to add additional aircraft and
additional resources when we do see that recovery, because we think
it'll be a strong recovery," Chief Executive David Abney said in an
interview this week with China Global Television Network.
Other transportation companies likely face a tough few months as
import demand softens, the firm says, but that could be offset
somewhat by the need for speedier airfreight services as global
supply chains try to get back on track.
Citigroup ultimately believes that the impact for the group will
net out to a per-share earnings decline in the mid single-digit
percentage range.
Write to Paul Ziobro at Paul.Ziobro@WSJ.com
(END) Dow Jones Newswires
February 28, 2020 15:41 ET (20:41 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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