Tags: UPS | global | logistics | rebound

UPS Ready for Global Logistics Rebound

By    |   Tuesday, 17 April 2012 11:29 AM

United Parcel Service (UPS) appears to be ready for the global turnaround, thanks to its strong balance sheet and huge footprint in global logistics. Analysts believe that it is well-positioned to raise prices as soon as the economic rebound gains traction worldwide.

United Parcel Service is the world’s largest package delivery company, a leader in the U.S. less-than-truckload industry and a top provider of global supply chain management solutions. The company delivers daily for 1.1 million shipping customers to 7.7 million consignees in more than 220 countries and territories. Its major competitors include Federal Express (FDX) and Deutsche Post (DPSTF), which owns DHL.

In 2011, UPS delivered an average of 15.8 million pieces per day worldwide, or a total of 4.01 billion packages. Total revenue in 2011 was $53.1 billion.

The firm also is a global leader in logistics and customizable supply chain control and visibility using its integrated ground, air and ocean global network. Over the past decade, UPS has expanded its logistics and distribution capabilities to approximately 800 logistics facilities in more than 120 countries, offering warehouse space of 35 million square feet.

The company provides logistics services, which includes transportation, distribution, forwarding, ground, ocean and air freight, brokerage and financing. It has three segments: U.S. domestic package, international package, and supply chain and freight.

“Our balance sheet reflects financial strength that few companies can match,” the company told investors at the end of 2011, reporting that it had then cash and marketable securities of approximately $4.275 billion and shareowners’ equity of $7.108 billion.

“Cash generation is a significant strength of UPS. This gives us strong capacity to service our obligations and allows for distributions to shareowners, reinvestment in our businesses and the pursuit of growth opportunities,” management said

UPS is a $76.26 billion market cap firm in a sector where the average company size is $1.96 billion. Its 12-month trailing P/E ratio is 20.72, slightly higher than its sector, air freight and logistics.

The projected five-year price-to-earnings-growth (PEG) ratio is 1.61, compared to 1.49 for the sector. The projected earnings per share growth for coming year is 13.93 percent, slightly under the sector average.


Analysts are generally upbeat on UPS, offering no negative ratings and a handful of outperform calls, including from Raymond James, Credit Suisse, Morgan Keegan & Co., Standard & Poor’s Equity Research, Piper Jaffray, and Deutsche Bank.

“We think UPS will likely see increased international and domestic volumes and higher pricing as the economy continues to show improvement,” said S&P analysts in early February.

“We think the company is a strong generator of cash, and we favor its historical use of its funds to pay dividends and repurchase stock. In our view, these positives support our buy opinion on the stock, despite a valuation above that of the S&P 500 on a P/E basis.”

UPS next reports on April 26.

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Tuesday, 17 April 2012 11:29 AM
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