United Parcel Service, Inc. (UPS): A Bull Case Theory

We came across a bullish thesis on United Parcel Service, Inc. on CompoundingLab’s Substack. In this article, we will summarize the bulls’ thesis on UPS. United Parcel Service, Inc.’s share was trading at $95.79 as of November 28th. UPS’s trailing and forward P/E were 14.81 and 12.99 respectively according to Yahoo Finance.

United Parcel Service, Inc., a package delivery and logistics provider, offers transportation and delivery services. UPS has long been a steady performer in the global logistics space, with revenue growing from approximately $36 billion in 2000 to around $91 billion in 2024, reflecting a 4–5% long-term CAGR. The company benefits from its expansive U.S. ground network, strong presence in healthcare logistics, and exposure to e-commerce and international trade.

While top-line growth has been moderate, UPS has focused on margin expansion, operational efficiency, and mix improvement, allowing it to maintain solid profitability despite cyclical headwinds, labor cost pressures, and competition from FedEx, DHL, and Amazon’s in-house logistics operations.

Looking forward, assumptions include a 10-year growth rate of 2–3%, long-term perpetuity growth of 2.6%, a WACC of 7.6%, and an industry EBITDA exit multiple of 11.8, underpinned by reinvestment efficiency in line with historical industry norms. UPS’s strategic initiatives—cost restructuring, shift to higher-margin segments, network leverage, pricing discipline, and disciplined capital allocation—support potential margin expansion, deleveraging, and a re-rating of the company’s multiple. These factors, combined with attractive dividends and shareholder returns, position UPS as a narrow-to-wide moat business capable of generating meaningful long-term value.

Risks include slower revenue growth, execution challenges, competitive pressure, margin volatility, macroeconomic and trade weakness, and geopolitical or regulatory constraints. While the stock is trading at roughly a 16% discount to fair value, the margin of safety is modest. A lower entry price would make UPS a far more compelling opportunity, offering upside potential with a stronger risk/reward profile for investors seeking steady, resilient logistics exposure.

Previously we covered a bullish thesis on FedEx Corporation (FDX) by Daan Rijnberk in September 2024, which highlighted the company’s strong U.S. ground and global express positions, cost-saving initiatives, and operational efficiency. The company’s stock price has depreciated approximately by 7.54% since our coverage. The thesis still stands as FedEx continues to deliver structural growth. CompoundingLab shares a similar perspective on UPS but notes a lower entry price would make it a more compelling opportunity.

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Disclosure: None.