Not all stocks rise on cue. Despite a decent Q3 EPS performance of 55 cents, United Parcel Service, Inc.'s (NYSE: UPS) shares have lagged, but I'm nevertheless Reiterating my Buy rating for the company, first recommended on April 7, 2009 at a price of $51.28. Here's why:Increased pricing power, in some delivery segments, and higher volumes will ensue in the quarters ahead, as the U.S./global economic recoveries strengthen. Overall, revenue should increase 7-9% in FY2010 after a difficult FY2009. The First Call FY2009/FY2010 EPS estimates for UPS are $2.17 to $2.70.
A decent dividend and possible share repurchases should support the stock until a wider swath of institutional investors (IIs) commit to the stock.
Technically, UPS's stock chart is in an uptrend and has cleared psychologically-significant resistance at $50.
True, the stock remains vulnerable to any announcement of lower revenue/earnings in FY2010, but the calculation here is that the $2.70 FY2010 EPS estimate will prove to be low.
Stock Analysis: United Parcel Service, Inc. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in UPS now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your UPS position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $33.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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