I'm a dividend investor with a value bias, so I prefer to buy historically well-run companies while they are out of favor on Wall Street. Buying stocks that everybody seems to love isn't something I usually do. Which is why I would buy United Parcel Services (NYSE: UPS) over Caterpillar (NYSE: CAT) today. Here's a deeper dive into my thinking.
United Parcel Services is one of a small number of large package delivery companies. This is a capital-intensive business that requires a vast distribution network and impressive logistics skills. It would be difficult for a new competitor to simply start from scratch. For example, Amazon (NASDAQ: AMZN) has been building out its own distribution business for years, yet it still uses UPS' services.
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That said, UPS has been around for a long time. The industrial giant needed to modernize its operations to incorporate the latest technology and trim inefficiencies that had accumulated over the years. This is exactly what it has been doing, while, at the same time, refocusing on the company's most profitable business lines. The process basically involved high up-front costs while revenues were falling, because the company was moving away from high-volume, low-profit-margin business (such as delivering packages for Amazon).
However, signs of progress are apparent. The company's revenue per piece in the U.S. market has been improving even as overall U.S. revenue has been falling. That is management's goal, and management believes 2026 will be the inflection point for the business, with the second half expected to be stronger than the first.
But Wall Street is in a show-me mood, with the stock still offering a historically high 5.8% yield and the price-to-sales and price-to-book value ratios below their five-year averages. The price-to-earnings ratio is above the five-year average, but earnings are being depressed by the turnaround right now, so that doesn't worry me. UPS looks like an attractive, high-yield value, with the turnaround effort nearing completion.
Catperillar's earth-moving equipment and power products are hot commodities today. First-quarter 2026 revenue rose 22% year over year, while adjusted earnings increased 30%. The company's backlog is at record levels. It is hitting on all cylinders.
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
