Ignore Analysts
What are these guys (or gals) thinking?
Often a day late and a dollar short
Package delivery giant United Parcel Service (UPS) disappointed investors last week when Q4 EPS came in light and 2015 estimates needed to be reduced.
Analysts who had been loving the stock above $114 last Thursday were busy over the weekend downgrading from Buy to Hold.
Jan. 26, 2015's pre-market opinion changes helped UPS open on Monday morning at just $101.70, down a cool $12.70 a share from where it was rated as "Outperform" just two trading days earlier.
Waiting for those lowered ratings before selling cost traders 11.1%. That’s more than the DJIA gained in all of 2014.
Even after the morning’s drop UPS was not especially cheap. It still fetched 19.1x the newly reduced 2015 estimate and yielded 2.64%. That compares unfavorably with the firm’s post-recession average levels of 18.2x EPS, along with 2.84% in current yield.
Anlaysts often miss on the flip side as well. Oppenheimer saw fit to upgrade Bed, Bath & Beyond (BBBY) pre-market on Monday. BBBY shares were rated ‘neutral’ at $55 last summer and near $62 during October, 2014.
Read More at: GuruFocus.
Disclosure: Short UPS Jan. 2017, $90 puts, Long BBBY shares, short BBBY Jan. 2017, $70 & $75 puts.
UPS has a decent yield of 2.7% and a many pluses including revenue growth, return on equity, growth in earnings per share, good cash flow from operations and increase in net income. In addition, with oil prices as low as they are, companies like UPS that rely heavily on fuel to run delivery operations, we should see a positive knock-on savings effect. I see the stock going higher in the mid to long term.
Hi Paul, Are you saying they didn't upgrade BBBY enough? It's been trading above $66 since October and is well up now, so I agree. What were they thinking?!?