Tag: USA

DHL extends Avendra contract (U.S.)

Posted by | Feb 4, 2008 | |

DHL said its USD 80 million contract with Avendra has been extended five years.

The company said the agreement covers overnight, ground and international delivery. Avendra is a Rockville, Md.-based hospitality procurement services company.

As part of the agreement, Avendra and its clients will use DHL for expedited delivery services — including shipping to and from hotels and resorts, corporate and regional offices, sales conferences, management companies — and the delivery of payroll.

“The hospitality industry is one of the most demanding from a service standpoint, and Avendra and its clients seek partners like DHL that help them maintain their reputation for service excellence,” said Charles Brewer, DHL executive vice president of sales, in a news release. “Through this new agreement, DHL will help the largest and most respected hospitality brands stay competitive by providing reliable, expedited shipping services that enhance their business and their guests’ experience.”

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FedEx + DHL Isn't Necessarily Bad for UPS

Posted by | Feb 4, 2008 | |

Rumors have been flying that DHL’s United States operations are up for sale. With the recent announcement that Deutsche Post’s DHL business unit lost 600 million Euros (USD 879 million) last year, the company is seeking strategic alternatives.

The leading candidate to purchase DHL is thought to be FedEx. While some may think that a FedEx acquisition of DHL could spell trouble for UPS, the new FedEx/DHL could actually provide some much-needed relief for both of these transportation companies.

Airborne no more

DHL hasn’t been a player in the American express delivery business for very long (that is, if it ever really was one). Deutsche Post’s DHL Worldwide Express purchased express carrier Airborne Inc. for USD 1.12 billion in 2003. Airborne Express was the low-cost carrier in the express shipping marketplace, often undercutting FedEx and UPS prices without the service guarantees that the bigger shippers provide.

DHL decided to rebrand the Airborne operations using the DHL name while keeping the low-price shipping position. DHL also scrapped the previous Airborne logo and colors, moving to bright yellow trucks and uniforms that couldn’t be missed even in one of those blinding snowstorms hitting the West Coast lately.

Considering that Deutsche Post paid USD 1.12 billion for an investment in the U.S. express shipping marketplace, last year’s loss of USD 879 million is significant, and it wouldn’t be surprising if they were looking to offload the U.S. DHL operations ASAP. But what does this say for the marketplace if the “low-price carrier” can’t compete in an economy that continues to echo “recession?” Wouldn’t you think that consumers would be looking to cut costs wherever possible in this economic climate?

The price is right

The answer may lie in the fourth-quarter earnings report that UPS delivered last week. Beyond the losses that it took because of pension write-offs, UPS stated that revenue per piece was up 2.3pct on “firm” pricing. UPS’ 2007 increase in list rates was 4.9pct (not including the additional increases in individual surcharge amounts), so growth in discounts given to corporate and individual customers must have made up the difference between increase in base shipping rates and realized revenue per package (assuming that weight per package stayed the same).

As background, to keep up in a competitive transportation marketplace, UPS, FedEx, and DHL give special incentive pricing programs to key clients. Actually, everyone seems to qualify as a “key” client today, and customers can gain discounts for simple tasks like using FedEx Ship Manager or by belonging to an organization such as the American Institute of Chemical Engineers.

So, even though UPS raised base rates by 4.9pct in 2007, they gave clients increased discounts such that the average actual rate increases only came out to 2.3pct. UPS and FedEx price competition means trouble for DHL since low-price is DHL’s key claim to fame. Combine this with a recent USPS advertising campaign touting no surcharges and low rates, and it’s easy to see how DHL could run into serious issues.

Yellow and blue make green

If FedEx does buy DHL’s U.S. operations, it wouldn’t be to boost its express or ground network. After all, those gaudy bright yellow trucks and planes aren’t necessarily an asset to anyone. No, FedEx’s potential purchase of DHL would be an easy way to stave off price pressures in a competitive shipping marketplace. In effect, FedEx would be taking one for the team: getting rid of the public competitor who fought on price alone.

That’s not to say that FedEx is going to buy DHL, or that the government would OK such a move. But if the yellow DHL trucks were to move on, that could mean green for both FedEx and those brown guys at UPS.

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Latest ‘Future of Mail’ paper: “Mail Trends Update” by Fouad Nader (Adrenale Corp.) and Michael Lintell (Pitney Bowes)

Posted by | Feb 1, 2008 | |

In recent years there has been an increase in the number of press articles and statements from posts predicting that mail volumes would decline. New technologies and process innovations have been introduced, preoccupying researchers and managers in the postal and mailing industries with the impact of accelerating electronic substitution and changing customer behaviors. What are the actual trends that emerge from examining in detail the best information available from key countries? What historical perspectives, trends and emerging patterns may be useful in understanding how mail volumes may evolve in the future? The purpose of this paper is to provide further insight into the key trends identified and discussed in the previous Mail Trends Analyses by comprehensively examining the evolution of mail and analyzing postal volumes along key variables that influence mail demand. This paper builds on the considerable research that followed the original mail trends analysis and was documented in the Background Papers published at www.postinsight.pb.com for the project: “Electronic Substitution for Mail: Models and Results, Myth and Reality.” The paper also takes advantage of recent work in the study of the “Future of Mail”, also on postinsight.pb.com.

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Saia, Inc from 31 January 2008

Posted by | Jan 31, 2008 | |

SAIA reports downside EPS. SAIA reported 4Q:07 EPS of USD 0.05 vs our USD 0.28 estimate and Cons USD 0.26. SAIA also benefited by USD 0.01/share from a lower tax rate. They were negatively impacted by about USD 0.04 related to “an employment matter” and benefited by an estimated USD 0.04 from net fuel impact. Rev, EBIT, and EPS changed y-o-y +11.2%, -68.9%, and -90.7% vs our expectations of +11.3, -21.8%, and -37.3%, respectively.

OR deterioration drives miss. SAIA’s OR deteriorated 410bp vs our expectation of 170bp of deterioration and 190bp in 3Q:07, resulting in EBIT down 69% y-o-y. The larger than expected deterioration was due to the weak pricing environment and several minor cost issues.

Yields ahead of expectations driven by fuel. SAIA’s yields (rev/cwt, gross of fuel) grew 6.1%, ahead of our 4.7% estimate which included a material increase in fuel surcharge. SAIA for the first time did not report yields net of fuel, but we estimate fuel surcharges accounted for almost 5pp of the gross yield growth and real pricing was likely flat to down considering 4% lower weight per shipment and a 4% increase in length of haul.

Tonnage below expectations. SAIA grew tonnage at 5.1% in 4Q:07, below our forecast of 6.5% and down from 8.9% in 3Q:07 as its acquisitions began to grandfather (the Connection closed 11/20/06). Tonnage declined 8% on a proforma basis in 4Q:07 and worsened throughout the qtr, but has improved to -4% in January.

Stock still has a lot of risk. SAIA is struggling with operating and cost issues as it continues to integrate two acquisitions made right into the downturn. We expect many of these issues to continue in the near term as competition in LTL pricing continues to increase in 2008 and we are sharply reducing our 08 and 09 EPS estimates. However, SAIA will likely benefit from potential capacity reduction by its competitors, especially in its core Southern region. For now BS is solid and mgmt has reduced C08 capex meaningfully.

INVESTMENT CONCLUSION: SAIA was up yesterday despite a materially weaker than expected report into the Fed interest rate cut and continued running for cover in the truck sector. SAIA was up 2.3% yesterday compared to our LTL Index excluding it up 3.3% and the S&P 500 down 0.5%. Year to date SAIA is up 2% compared to our LTL index excluding SAIA now up 17% and the S&P 500 down 8%.

We have reduced our C08 and C09 EPS estimates by 56% and 42%, respectively, from USD 1.45 and USD 1.55 to USD 0.63 and USD 0.90 (compared to prior Consensus USD 1.42 and USD 1.76). Based on our reduced forward estimates, SAIA is currently trading at 20.7x and 5.2x our forward year EPS and EV/EBITDA, respectively, compared to its average 1, 3 and 5 year averages of 10.4x, 11.5x and 12.0x, and 4.7x, 4.9x and 5.0x. SAIA’s balance sheet feels solid at this point ending the year with a debt ratio including off balance sheet leases of 48.8% compared to 51.6% at year end 2007. We now project SAIA will bottom with an EPS loss during 1Q:08; however we have little visibility to our estimates. SAIA remains rated Peer Perform.

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UPS Board increases dividend

Posted by | Jan 31, 2008 | |

The UPS Board of Directors today increased the regular quarterly dividend to USD 0.45 per share from USD 0.42 on all outstanding Class A and Class B shares as a sign of its confidence in the company’s growth prospects and financial strength.

The dividend is payable March 4, 2008, to shareholders of record on Feb. 11, 2008.

UPS’s dividend has more than doubled since February 2003. The company has either increased or maintained its dividend every year for almost four decades.

The Board also approved an earlier payment schedule for the dividend typically declared in November. Beginning this year and going forward, that dividend will be paid in December instead of the following January. The actual payment date will be determined at the November meeting of the Board.

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