Why I'm Red-Flagging UPS

▶ If you missed it: I recently added UPS to the Red Flag Alerts list, and said a full report was in the works. So, as promised...

To say UPS is a mess would be an understatement.

As is often the case, the story can best be told by a few charts, such as this one, which shows the rise in net debt...

While free cash flow is tumbling...

And operating margin is getting squeezed....

All of this is reflected in the company's stock, which along with most of its other metrics, had made UPS a star during the post-pandemic stay-at-home boom. Having a fairly new, well-liked CEO – Carol Tomé took the reins in the early days of Covid – didn’t hurt either. My, what a difference a few years make...

Concerns over a possible strike caused customers to flee and set in motion a series of events that suggests the worst is far from over for UPS. It also exposed the vulnerabilities of a business structure whose time has passed it by.

Which is where our story begins...

The Bull Case

But first the bull case, courtesy of Tenzing Memo, which I have found to be an exceptional source of getting up-to-speed on companies. This is an AI-generated summary...