Tag: UPS

UPS Analyst Meeting

Posted by | Mar 13, 2008 | |

UPS Analyst Meeting – Little New Information, Except Weakened Near-Term Demand

MOSTLY INFORMATION MEETING. UPS hosted its 1st analysts’ meeting in 18 mths but provided little new info. We were surprised Mgmt. didn’t spend more time breaking down the benefits of the recently ratified Teamsters’ contract that will be implemented on Aug. 1 and that we believe is a clear improvement from the past 2 contracts.

DOMESTIC PACKAGE VOLUMES WEAKEN IN FEB. AND MARCH. Mgmt updated current operating expectations stating that domestic package vols, which were up +2% in Dec. and +3% in Jan. had taken a step back down to -2% the past 6 weeks. Dom. Pack. vols had been flat the first 11 months of C07 and have in aggregate remained flat for 14 mths but with a spike up and now back over the past 3 mths.

REDUCING OUR 1Q EPS AND MAINTAINING BELOW CONS 08 EPS. If vols don’t improve mgmt noted it will struggle to make the low end of prior 1Q guidance range of USD 0.94-USD 0.98. We have reduced our 1Q EPS estimate from USD 0.95 to USD 0.93 to reflect lower vol. expectation, while tweaking up our 2Q estimate a few cents to reflect lagging fuel surcharge gains. We have retained our low-end USD 4.35 08 EPS vs. Mgmt’s re-affirmed USD 4.30-USD 4.50 (and Cons. USD 4.43).

USPS PARTIAL DEREGULATION ON-TRACK FOR MAY. Separately, yesterday the US Postal Service announced that it will increase its competitive product prices between 1.5% and 9.5% on May 12, and begin to offer at this point still unknown pricing incentives to its larger customers. We believe it is too early to understand how the new partial postal deregulation will play out for package rates, but we don’t expect a C08 impact.

UPS REMAINS RATED OP. Our longer-term thesis remains unchanged, and we would use any near-term weakness in UPS related to continued weak vols as a near-term buying opportunity. UPS does not seem priced for perfection and the benefits from an improved new Teamsters contract and enhanced competitive position vis-à-vis FDX and DHL will likely play out gradually over the next several years.

INVESTMENT CONCLUSION: UPS closed yesterday down 1.2% vs. the S&P 500 down 0.9% and FDX down 1.3%, despite offering a 1Q EPS warning. It is currently trading at 16.2x and 8.8x our unchanged forward 12-month P/E and EV/EBITDA estimates, compared to its 1, 3, and 5 year averages of 16.4x, 18.1x, and 20.5x, and 8.9x, 9.4x, and 10.6x, respectively. We believe that over the long term UPS should trade at a market multiple roughly inline with the S&P 500, and likely above that in a period when its growth reaccelerates which we expect over the next several years. In addition, because of UPS’s international trade exposure, we believe it can continue to benefit from strong secular international trade volumes despite a slower economy (particularly domestic) and with its Teamsters contract locked down for another five years, the company stands poised to benefit from any potential labor woes at its competitor FDX’s Ground unit. UPS is one of our favorite names not only for its growth potential, but also for its defensive status, solid dividend, and limited downside risk. In addition, UPS is levering its solid balance sheet through USD 10B in share repurchases over the next two years, which should also help its EPS growth in a slower economy. Our unchanged USD 85 target price assumes our unchanged target forward P/E of 17x-18x out nine months from now on our then forward unchanged 2009 EPS estimate of USD 4.90. UPS remains rated Outperform.

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UPS holds Investors Conference

Posted by | Mar 12, 2008 | |

UPS Chairman and CEO Scott Davis told Wall Street analysts and investors the company is poised for long-term growth, driven by globalization.

He said UPS has made significant progress in developing its global, multi-modal integrated transportation network. The UPS network now handles freight forwarding and less-than-truckload shipping as well as small package transportation on UPS-owned or third-party assets. This unique capability provides a seamless customer experience regardless of the type of shipment, the mode of transportation or the location around the world.

Chief Financial Officer Kurt Kuehn reviewed UPS’s 2010 goals. He stated the company remains on target to achieve the long-term goals that it revealed at its investor conference in November 2006. From 2005 to 2010 UPS anticipates:

– Revenue growth of 6-to-8 pct per year.
– Compound annual earnings per share growth of 9-to-14 pct.
– And return on invested capital of 23-to-25 pct.

After noting that several economic indicators have recently worsened, Kuehn provided insight into the company’s results for the first two months of 2008. He said the U.S. package segment experienced a solid January, but volume declined in February across virtually the entire customer base. “If these trends continue through March, our earnings guidance for the first quarter will be difficult to achieve,” Kuehn added.

Other areas of the business are performing well. For example, international average daily volume, including U.S. export volume, continues to show strong growth. Kuehn also indicated the international and supply chain segments remain on target for the quarter. Despite short-term economic challenges, UPS’s annual earnings guidance remains USD 4.30-to-USD 4.50 per share.

To capitalize on that opportunity, UPS has enhanced its service offerings to participate in a market in excess of USF 225 billion, encompassing small package, air and ground freight.

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UPS says slowing economy may weigh on first quarter

Posted by | Mar 12, 2008 | |

United Parcel Service Inc., said it may not meet its first-quarter earnings target as U.S. economic growth slows.

Domestic shipments at UPS have dropped for six straight weeks, Chief Financial Officer Kurt Kuehn said today at an investor presentation in New York. Air deliveries have fallen faster than ground shipments. The declines make UPS’s per-share profit goal of 94 cents to 98 cents “difficult to achieve,” Kuehn said. He reaffirmed full-year guidance of USD 4.30 to USD 4.50.

The economic outlook for this year is “uncertain at best,’ Chief Executive Officer Scott Davis told investors. Lower interest rates and tax rebates that are part of a federal economic stimulus package may help reinvigorate demand, he said.

“I’m not ready to proclaim the quarter lost, and I’m not ready to proclaim the economy lost,” Davis said.

Higher fuel costs, job losses and falling home values have dimmed growth prospects for the economy. It will expand 1.4 percent for all of 2008, the weakest since the last recession in 2001, based on the median estimate of 62 economists polled by Bloomberg from March 3 to March 10.

UPS will focus on expanding overseas sales to overcome slowing U.S. demand, Chief Operating Officer David Abney said.

The company is adding operations in 10 cities in China and buying seven Boeing Co. 747-400 wide-body freight airplanes, Abney said. He said India’s export volume jumped more than 25 percent last year, while European exports rose more than 10 percent.

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UPS expands supplier diversity program to include LGBT-owned businesses

Posted by | Mar 11, 2008 | |

UPS announced the expansion of its award-winning supplier diversity process to include lesbian, gay, bisexual and transgender (LGBT)-owned businesses through a partnership with the National Gay & Lesbian Chamber of Commerce (NGLCC).

NGLCC-certified businesses now can register to participate in UPS’s supplier diversity process. Launched in 1992, the supplier diversity process provides UPS business opportunities for small businesses and those owned by minorities, women, veterans and now lesbian, gay, bisexual and transgender individuals.

The NGLCC represents the interests of an estimated 1.4 million LGBT-owned businesses. Through its affiliated network of 45 state and local chambers and business organizations, the NGLCC is the largest LGBT business development and economic advocacy organization in the country.

Additionally, as part of its partnership with the NGLCC, UPS is offering members of the organization a discount on UPS shipping services.

UPS has been recognized for the success of its supplier diversity efforts by organizations such as the National Minority Supplier Development Council (NMSDC), Women Business Enterprise National Council (WBENC) and Women Impacting Public Policy. Last year, UPS won NMSDC’s top corporate award and was listed as one of the top corporations for Women Business Enterprises by WBENC.

In addition to leading its industry in expanding its supplier diversity process to include LGBT-owned businesses, UPS also is a leader in its commitment to LGBT employees. The company recently received a top rating of 100 percent, the highest in its industry, from the Human Rights Campaign’s Corporate Equality Index, which measures how employers treat LGBT employees based on factors such as non-discrimination policies, diversity training and benefits for domestic partners and transgender employees.

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Post-Switch Urges Bulk Mailers to Consider Alternatives to Royal Mail

Posted by | Mar 10, 2008 | |

Independent postal broking agency, Post-Switch is urging high volume mailers to reduce postage costs by switching from Royal Mail before it puts up its prices.

On April 2nd 2007, Royal Mail raised first class postage by 2p and second class by 1p and its commercial service ‘MailSort’ increased tariff prices by 1 pct – 3.8 pct. As part of its pricing agreement up to 2010, Royal Mail is proposing a further price hike in April 2008 of 6p.

Post-Switch is an impartial postal broker, providing expert advice on matching direct mail to the most suitable supplier at the optimum tariff. Set up in 2006, Post-Switch is part of integrated communications group, Kingfisher. It understands where savings can be made on postage and will negotiate with up to 20 rival postal providers including DHL, UPS, and TNT to achieve the best price and the best delivery date.

Post-Switch already handles over one million items of mail each month and is working with high volume mailers like Marie Curie Cancer Care and NSPCC as well as commercial operator, Network Rail. The service offered by Post-Switch delivers direct mail campaigns in 48 hours and can secure savings of up to 22.5 pct against MailSort charges.

To incentivise companies to switch from Royal Mail to another provider, Post-Switch is offering those who sign up before 2nd April a postal price freeze until the end of 2007. This means that mailings will only cost the same unit rate for the rest of the year. So, if the rival operators to Royal Mail also raise their prices, Post-Switch clients will not be affected by the increase.

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