United Parcel Service, Inc. (NYSE:UPS) — UPS is the world’s largest service for both retail and industrial deliveries. Long considered a gauge of future economic growth, this large-cap stock was recently raised by Standard & Poor’s Capital IQ to a five-star buy. And, they raised their 12-month target price by $10 to $140.
They expect record holiday volumes and will retain their 2016 earnings per share estimate at $5.81. Their EPS for 2017 is $6.17, which was cut by 4 cents due to a slight shortfall of Q3 2016 earnings of $1.44, two cents less than S&P estimated.
However, revenues beat their target and cash flow was strong.
S&P forecasts strong online sales, which are expected to exceed in-store sales and could result in higher-than-forecast deliveries and resulting higher revenues. UPS has traditionally been a strong generator of cash and uses it to repurchase shares and increase dividends. UPS’s current dividend is $3.12 per share for a 2.7% yield.
Following a low at about $90 in January 2016, UPS climbed to over $100 in April and began a nine-month consolidation in a long-tailed cup-and-handle formation.
The stock’s price meandered around the 50-day moving average until, on Nov. 7, it broke from the moving average on very high volume. The high volume supported the breakout until almost reaching $115, when profit-taking on low volume occurred, bolstering my opinion that the pullback is temporary.
Thus, try to buy UPS at $114 with a trading target of $130 by mid-January for a proposed gain of 14%. UPS is also appropriate for long-term investors due to its relatively high dividend, growth history and B+ rating.
