Bloomberg Markets 01/30/2025
"Bloomberg Markets" follows the market moves across every global asset class and discusses the biggest issues for Wall Street. Today's guests are: Oppenheimer Executive Director Of Equity Research Kristen Owen, UPS CEO Carol Tome, Betterment CEO Sarah Levy, PIMCO Portfolio Manager Of Multi-Sector Credit Sonali Pier, and Tribe AI CEO Jaclyn Rice Nelson. (Source: Bloomberg)
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It's fair to say that UPS has experienced some financial trouble recently. The pandemic e-commerce boom faded out. The inflation crisis accelerated the package-shipping slowdown. More recently, trade tensions between Washington and Beijing pose new threats to the shipping industry. UPS thrives on high consumer confidence and healthy global trade trends. The company suffers when those market qualities are headed in the wrong direction, as they are in 2025. So yes, UPS is having some trouble. However, it is well equipped to handle these challenges. Even in a painful downswing, UPS remains a very profitable business. The company generated $5.9 billion of net income over the last four quarters, converting 92% of the paper profits into free cash flows. UPS spent all of the cash profits on dividend checks. That's hardly ideal, and the company doesn't have much room for dividend increases in this economy. At the same time, UPS has $5.1 billion in cash reserves and a rock-solid credit rating. 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The helpful moves it makes in this challenging economy should translate into stronger earnings in the next macroeconomic upswing. Investing is a marathon, not a sprint. UPS stock is cheap right now for short-sighted reasons. The company should thrive in the long run, equipped with a world-class shipment system and a proactive management team. By focusing on more profitable services, UPS could get back to generous dividend increases in 2026 and beyond. And in the meantime, the dividend yield stands at an eye-popping 6.7%. It's nearly an all-time record for UPS, and one of the 10 most lucrative yields found in the S&P 500 (SNPINDEX: ^GSPC) index. Furthermore, UPS shares are valued at just 14.3 times trailing earnings and 0.9 times sales. These multiples are about half of their long-term averages and nearly equal to the all-time lows seen in the subprime mortgage meltdown of 2008. Taken together, the rich dividend yield and affordable stock price add up to a great long-term investment. 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