Thursday, October 9, 2014

Why UPS Could Rise

In a sense, the three reasons that United Parcel Service (NYSE: UPS  ) could rise in 2014 can be best understood by thinking about what has, and hasn't, changed in the global economy since 2008. What hasn't changed is the inexorable rise of e-commerce sales and therefore growing ground-based Business to Consumer, or B2C, growth for UPS. However, global trade hasn't grown in line with global GDP growth since 2008 -- a big change from previous economic recoveries. These two facts come together to create challenges and opportunities for UPS; let's examine how UPS is dealing with them, and why it looks set to soar.

E-commerce growth will likely lead to volume growth for UPS

A look at some simple statistics demonstrates the increasing importance of e-commerce sales to the economy. As the chart below shows, U.S. e-commerce sales have more than doubled since 2008. In addition, e-commerce now makes up a significant share of U.S. retail sales.

US E-Commerce Sales as Percent of Retail Sales Chart

All of which leads to the first two reasons that UPS can soar.


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