UPS 134.82 (+2.63%)
US9113121068TransportationIntegrated Freight & Logistics

Last update on 2024-06-07

United Parcel Service (UPS) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Detailed Piotroski F-Score analysis of United Parcel Service (UPS) for the year 2023, resulting in a score of 4 out of 9. Learn about UPS's financial health.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 4

We're running United Parcel Service (UPS) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
0
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
0

The Piotroski F-Score evaluates a company's financial health on a scale from 0 to 9, based on criteria related to profitability, liquidity, and operating efficiency. United Parcel Service (UPS) was given a score of 4, indicating some areas of strength but also significant weaknesses. The company's profitability appears solid with positive net income and cash flow but struggles with declining return on assets. Liquidity ratios indicated mixed results with an increase in leverage and a reduced current ratio. Operational metrics like gross margin and asset turnover also showed declines, indicating efficiency challenges.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 4, UPS demonstrates a stable but not outstanding financial position. Its positive net income and strong cash flows are encouraging, but declining liquidity, increased leverage, and reduced operational efficiency raise some red flags. As an investor, it may be worth further investigating the underlying reasons for these metrics, particularly if you are seeking steady, long-term growth. While not a definitive 'buy' or 'avoid,' UPS could be a potential candidate for those interested in a company with stable earnings but should be approached with caution due to its financial weaknesses.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of United Parcel Service (UPS)

Company has a positive net income?

Net income is a crucial indicator of a company's profitability. A positive net income signifies that a company is earnings after all its expenses, suggesting financial stability.

Historical Net Income of United Parcel Service (UPS)

For United Parcel Service (UPS), the net income in 2023 stands at $6.71 billion, which is a positive figure. Historically, over the past 20 years, UPS has consistently had positive net income figures except in 2007, where the value was significantly lower at $382 million. Notably, there was a substantial jump in 2020 with a net income of $12.89 billion, which saw a slight decrease over the subsequent years but remained robust in 2023. This trend is favorable and reflects positively on UPS's financial health.

Company has a positive cash flow?

The criterion checks whether the company's cash flow from operations (CFO) is positive. Positive CFO indicates that the company is generating sufficient cash from its core business operations, suggesting financial health and operational efficiency.

Historical Operating Cash Flow of United Parcel Service (UPS)

In 2023, the CFO for United Parcel Service (UPS) is positive, standing at $10.238 billion. This translates to a strong performance, reflecting the company's effective management of cash inflows from its core operations. Over the past 20 years, the CFO for UPS has generally been positive, with only a few instances of volatility, such as in 2007 ($1.123 billion) and 2017 ($1.479 billion). The current figure aligns with the healthy trend seen over recent years, particularly the spikes in 2019 ($12.711 billion), 2020 ($10.459 billion), and 2021 ($15.007 billion). This positive CFO trend highlights the robust operational efficiency of UPS, making this a favorable indicator in the Piotroski analysis.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures how efficiently a company uses its assets to generate profit. An increasing ROA indicates improving efficiency and profitability, which is generally seen as a positive sign for investors.

Historical change in Return on Assets (ROA) of United Parcel Service (UPS)

UPS experienced a decline in ROA, with the metric decreasing from 0.1644 in 2022 to 0.0945 in 2023. This negative trend reflects a decrease in the company’s efficiency in generating profit from its assets. When we compare this to the industry median ROA of 0.1817 in 2023, UPS significantly underperforms, suggesting fundamental challenges. While the historical 20-year data shows fluctuating yet resilient performance in operating cash flow, the consistently lower-than-average ROA underlines competitive pressure.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income aims to ensure that a company is generating enough cash to cover its net income, which is an indicator of high earnings quality and financial health.

Historical accruals of United Parcel Service (UPS)

For UPS in 2023, the operating cash flow is $10,238 million, surpassing the net income of $6,708 million. This trend is advantageous as it suggests strong earnings quality and effective cash flow management. Historically, UPS has maintained a robust operating cash flow, particularly noticeable from 2018 to 2021 where it consistently exceeded $10 billion, marking a peak of $15,007 million in 2021. The consistent high cash flow compared to net income underlines UPS's efficiency in generating cash from its operations, despite fluctuations in net income, which maxed at $12,890 million in 2020 but dipped to $6,708 million in 2023. This indicator positively reflects UPS's financial resilience, granted a 1 point for this criterion.

Liquidity of United Parcel Service (UPS)

Leverage is declining?

Change in Leverage: This criterion evaluates whether a company has reduced its financial leverage, indicating improved financial stability.

Historical leverage of United Parcel Service (UPS)

When analyzing United Parcel Service (UPS), the leverage ratio has increased from 0.2891 in 2022 to 0.32 in 2023. Despite many fluctuations over the last 20 years, this increase in 2023 indicates greater dependency on debt, which adds 0 points on the Piotroski scale for this criterion. Although the leverage ratio has traditionally shown variability, the enhancement in leverage this year necessitates close monitoring, which may signal a rising financial risk if the trend escalates.

Current Ratio is growing?

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its current assets.

Historical Current Ratio of United Parcel Service (UPS)

In 2023, United Parcel Service (UPS) reported a current ratio of 1.0983, a decline from 1.2248 in 2022. This downward trend indicates a reduction in liquidity, as UPS's ability to cover short-term liabilities with current assets has weakened. For a financial health check-up, this does not yield a score in the Piotroski scale, as an increasing current ratio would have added 1 point. Additionally, this ratio falls below the industry median of 1.1884. Over the last two decades, UPS's current ratio peaked at 1.9602 in 2010 but has been relatively volatile with consistent declines in recent years, hovering close to the industry median, serving as a critical indicator of the company's liquidity position.

Number of shares not diluted?

This criterion assesses whether a company is buying back its shares. A lower number of outstanding shares indicates such buybacks, often seen positively as it shows management's confidence in the company's future.

Historical outstanding shares of United Parcel Service (UPS)

In 2022, United Parcel Service (UPS) had 871,000,000 outstanding shares. By 2023, this number had decreased to 859,000,000. This decrement indicates that UPS has been buying back its shares, signaling confidence in its own business prospects. Over the last 20 years, UPS's outstanding shares show a trend of gradual decline from over 1.13 billion in 2003 to 859 million in 2023. This consistent reduction underpins the company's focus on enhancing shareholder value through buybacks. Therefore, we add 1 point for this decrease.

Operating of United Parcel Service (UPS)

Cross Margin is growing?

The change in gross margin examines whether a company's profitability and efficiency in managing production costs have improved by comparing one year to the previous year.

Historical gross margin of United Parcel Service (UPS)

UPS's gross margin decreased from 0.2094 in 2022 to 0.1894 in 2023, reflecting a decline in profitability and cost management efficiency. Contextualizing this within a broader 20-year historical view, the gross margin has been fairly volatile. The firm's gross margin surpassed the industry median (0.1817) in 2023 but failed to maintain its previous year's peak. This trend earns UPS zero points in the Piotroski analysis for this criterion.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales. It’s a vital indicator of operational efficiency.

Historical asset turnover ratio of United Parcel Service (UPS)

In 2023, United Parcel Service (UPS) reported an Asset Turnover ratio of 1.2813, compared to 1.428 in 2022. This trend reveals a noticeable decline in the Asset Turnover ratio, which means the company has become less efficient in using its assets to generate sales. Analyzing data over the last 20 years further underscores this trend, as the company's highest Asset Turnover ratio was 1.6247 in 2014, showing a peak efficiency then. Consequently, for this criterion, UPS would score 0 points. This decrease in the Asset Turnover ratio could be influenced by various external and internal factors, including market dynamics, capital investments, and operational changes.


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