Can UPS Ship Investors a Better 2013?

As 2013 begins, now's a good time to look at the future prospects for the stocks you own. If you don't know where a company's headed in the next year and beyond, then it's impossible to make an informed decision about whether you should add the stock to your portfolio -- or sell it if you already own it.

Today, I'll look at UPS (UPS 0.15%). The leading package shipper delivered a decent gain in 2012 as the company saw further gains in volume to record highs. But with the economy continuing to pose threats to further growth, can UPS avoid a downturn? Below, you'll learn more about UPS's prospects for 2013.

Stats on UPS

Source: Yahoo Finance.

Will UPS deliver the goods in 2013?
UPS looks poised to have a pretty strong 2013, if analysts' expectations are correct. Although their target price is only about 10% higher than the stock's current level, analysts see stronger expansion in earnings of about 12% on a big acceleration in revenue growth.

The e-tail revolution has led to a renaissance for UPS and rival FedEx (FDX 1.30%), and it shows no signs of stopping anytime soon. Although Amazon.com (AMZN -2.91%) may seem overpriced from an investing perspective, it still has a strong and growing retail business, as the past holiday season showed, and that bodes well for UPS's shipping volume in 2013 and beyond. In particular, as rate increases take effect, UPS's revenue and profits could rise as long as the service remains popular for shippers.

But competition for UPS will remain fierce this year. Not only does FedEx fight for every piece of potential business, but international shippers such as DHL are trying to maintain their positions in the industry as well. Even if UPS manages to get its proposed buyout of TNT Express approved, it will still face Europe's slow economy.

The big question for UPS will be whether it can retain its leverage over the companies it works with throughout its logistics network. For instance, as energy prices have fallen, the need for fuel surcharges has dropped. But given its contracts with Union Pacific (UNP 0.73%), CSX (CSX -0.36%), and other Tier 1 railroads as well as trucking companies for intermodal transport, if UPS can negotiate lower costs while still keeping customer pricing high, the margin expansion could greatly boost UPS's profits.

If the economy grows faster in 2013, UPS could see a much better year than it did in 2012. That would make shareholders who are already happy with a lucrative dividend yield even happier.

Click here to add UPS to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.