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What United Parcel Service's Weak Outlook Means for Mutual Fund Investors (UPS)
Shauna O'Brien Jan 23, 2015
On Friday Morning, United Parcel Service (UPS) updated its outlook for its 2014 earnings. Here’s what the news means for mutual fund investors.
Inside the News
Shares of UPS fell over 11% on Friday after the company reported that it has cut its outlook due to the high cost of holiday deliveries. The company added additional labor going into the holiday season to meet demand for shipping. However, the costs associated with the additional labor cut into the company’s profits.
UPS reported that it now expects 2014 EPS of $4.75. Previously, the company expected EPS to be between $4.90 and $5.00.
Management Will Need a Better Plan
With the decline in energy prices, this news has come as a surprise for many investors. It was expected that low energy costs would have benefited the company, even with the increase in labor costs. Going forward, we do expect UPS to benefit from lower energy prices. Being that this is becoming a recurring theme, management will need to figure out a plan to avoid future holiday generated hiccups.
This stock may be ideal for moderately conservative investors, as it currently offers a dividend yield of 2.6%.
Mutual Funds to Watch
Investors interested in UPS may be interested in the funds listed below. These funds currently have the largest stakes in the company.
| Symbol | Mutual Fund | Stake |
|---|---|---|
| VTSMX | Vanguard Total Stock Market | 1.31% |
| VWELX | Vanguard Wellington | 0.92% |
| VFINX | Vanguard 500 Index | 0.84% |
The Bottom Line
The funds listed above allow investors to gain exposure to UPS while remaining diversified. Investors interested in UPS may also be interested in FedEx (FDX).
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