Industrial Stocks Plummet 40% - Buy or Sell?
· news
When Value Stocks Become a Bargain
The latest market turmoil has sent industrial stocks into free fall, with UPS and Fluor among those trading at 40% discounts from their all-time highs. The reality is more complex than simply viewing these dips as buying opportunities for long-term investors.
UPS’s troubles are well-documented. Its business model was disrupted by a post-pandemic drop in deliveries, exacerbated by inflation and intense competition from FedEx and other couriers. The company’s margins were further squeezed after it struck a new contract with the Teamsters union to avert a strike in 2023. However, UPS has been quietly stabilizing its business by securing higher-margin orders from small- to medium-sized businesses and healthcare customers, trimming its workforce, and automating more of its logistics network.
This effort is crucial for UPS’s long-term survival. The company’s numbers may seem grim – average daily package volume fell from 25.25 million to 20.85 million between 2021 and 2025, total revenue dropped from $97.3 billion to $88.7 billion, and adjusted EPS declined from $12.13 to $7.16 – but they also reveal a company in transition. Analysts expect UPS’s revenue and adjusted EPS to grow 4% and 12%, respectively, in 2027.
UPS is an attractive investment due to its valuation. The stock still looks like a bargain at 14 times forward earnings, and it pays a high forward yield of 6.3%. However, this isn’t the most compelling reason to buy into UPS. Rather, it’s the company’s demonstrated ability to adapt in a rapidly changing market.
In contrast, Fluor’s troubles are more opaque. The engineering and construction firm’s stock closed at a record high of $82.64 in June 2008, but it still trades nearly 40% below that price. What’s caused this decline? The company’s struggles with cost overruns on several major projects have raised questions about its ability to manage complex infrastructure developments.
The reality is that industrial stocks like UPS and Fluor are not immune to the broader economic headwinds currently buffeting the global economy. However, they also offer a chance for investors to buy into established companies with proven track records of resilience.
In an era where market volatility is increasingly driven by speculation rather than fundamentals, it’s refreshing to see value stocks like UPS and Fluor offering a more measured approach to investing. These are not exciting investments, but their stabilization could make them attractive again to value-seeking income investors.
As the global economy continues to navigate challenges posed by geopolitics, inflation, and interest rate hikes, industrial stocks like UPS and Fluor will continue to face pressure. However, their ability to stabilize and even grow in the face of adversity makes them compelling investments for long-term investors seeking value.
Reader Views
- EKEditor K. Wells · editor
The UPS conundrum: are we mistaking declining earnings for true value? While analysts project modest growth in 2027, investors should consider the company's debt load and how its efforts to automate logistics might further compress workforce numbers. The real question is whether these cost-cutting measures will ultimately cannibalize the very customer base UPS is trying to save – not to mention the long-term implications of a shrinking labor pool for a service industry reliant on human capital.
- CMColumnist M. Reid · opinion columnist
While the article accurately diagnoses UPS's woes and resilience, it glosses over the elephant in the room: supply chain bottlenecks that still plague the company despite its efforts to adapt. Those 40% discounts are indeed tempting, but investors should exercise caution when betting on a turnaround that may be years away from fruition.
- CSCorrespondent S. Tan · field correspondent
The market's fascination with industrial stocks as value plays is understandable, but let's not forget about debt and leverage in these companies' balance sheets. While UPS has been quietly trimming its workforce and automating logistics, Fluor's $1.4 billion in long-term debt and 10% annual interest rate suggest that a swift recovery may be more illusion than reality. Investors need to carefully weigh the risks alongside potential rewards when considering these bargain stocks.