The biggest problem with a compressed holiday season is the potential for a weather event. Both UPS and FDX indicated that this issue was their biggest concern. Well, we have such an event already and should consider ourselves lucky that most of it is occurring on the weekend in the larger populated areas of the country. Hopefully after this snow/ice storm moves on the next few weeks will be somewhat calm.
For example, has the system been able to cut down on the need for helpers or additional trips?
Beyond that, much of the selling is scheduled by their financial advisor for taxation considerations. The other thing to be considered is the selling of shares periodically to allow them to acquire option-related shares at lower prices. Wouldn't you sell shares around $100 when you can exercise the right to buy new shares at $70 or so?
It's going to be an interesting decision. They have been steadily decreasing the # of outstanding shares and returning them to treasury so the dollar amount to be paid out is reduced. Some may remember when we had just under a billion shares outstanding and now the # if just over 726M so the gross dividend expense is less. At the same time, we could readily depend upon a 9-10% on average dividend increase due to our range-bound share price. The last year has seen our share price really move upwards which has really scuttled those who engaged in covered call activities and we kept having to buy back calls to avoid have our shares bought out from under us at a discounted price. The same share price scenario will make it hard to remain near the ideal (in the shareholder's mind) 3% dividend level. The S%P still sits around 2.6% so we have always been were an attractive dividend play. If the UPS BOD chooses to match the 2.6%, the dividend at $101/share would be $2.626. Clearly, that would be too low so I'd be looking for $2.72 or an increase of $.06/quarter. That would leave us at 3% if we dropped to $90 which, given our wildly careening congress and its ability to shrink domestic growth, is a distinct possibility. If we were to stay around $100, we would be getting 2.7% or so. We also need to consider that we'll be facing the implementation of the new Teamsters contract as well so I'm betting $2.72 will be the number.
Thanks for your feedback. I have always believed that the ability of the driver to optimize his/her day is greatly impacted by the preloader. IMHO, they should be the highest paid part-timer- maybe even be eligible for some sort of bonus structure. As it is anyway, they have the toughest shift hours-wise and the work they do is as physical/mental as any in the company short of the very well paid driver.
That's got nothing to do with this Form S-3ASR filing. This SEC statement specifically mentions that there are just over 926 million shares outstanding. It then states that we are authorized to issue 200M preferred shares, 4.6 BILLION A shares and 5.6 BILLION B shares. It also states that only the Class B shares would be distributed. So the question is why the huge authorization of new shares? There should be no issue with takeover concerns since the 10 to 1 voting covenant for Class A shares exists. So, the only 2 other possibilities is for a secondary issuing to raise funds which would make pretty good sense since the shares are trading at a remarkably high level and, if the shares could be sold to an interested party at a price close to the retail price, it would be a wise management move. The other explanation is the consideration of a stock split but I'm not sure why new shares would need to be issued in that circumstance. Any experienced financial guy following this thread have any thoughts?
Tough one to figure unless it's simply a formality. Apparently, it's not unusual to put in place an SEC filing for a secondary stock offering to take advantage of timely access to capital markets when conditions are optimal. So maybe it's simply a flexibility step. What I found interesting were the numbers. It said the prospectus indicated the right to issue 200M preferred shares and 10.2 billion common shares (5.6B class B and 4.6B class A). It made me wonder if this is a precursor to a stock split? Presently, we have 938.28M shares outstanding with a 721.5M float. It also makes me wonder further about the concerns I expressed in an earlier post about buying shares back when they are so richly valued. Anyone with a definitive financial background able to offer better analysis?
upsman- it's great to hear positive feedback from a driver with hands on experience. May I ask if the accuracy of your preloader's work is as effective as the on-road Orion system?
Yesterday it was reported that 3 hedge fund managers had upped their shares of FDX by just over 1% of the total FDX shares outstanding. Dan Loeb in particular is viewed as an activist hedgie who only engages in companies where he sees a way to influence the management team to act more aggressively towards share valuation. The market has responded accordingly with shares nearly at the $140 mark and CEO Smith feeling the need to say, "I'm still the boss here and don't intend to go anywhere." I find this whole scenario to be curious for a number of reasons. First, in my mind anyway, FDX shares are severely overvalued with as forward P/E just under 20 compared to UPS' 18.5. Secondly, FDX faces (sooner or later) a hugely expensive, state AG by state AG legal attack on their independent contractor classification that has allowed their ground operations to be so profitable. Thirdly, the UPS Orion roll-out should make a huge difference in expanding margins, cutting training costs, cutting driver mileage and saving fuel costs that will only increase over time. Does FDX have such a novel approach? Fourth, could the hedge fund managers be pressing FDX to increase its dividend payout thereby impacting capital expenditures? In any event, I'm curious as to why these "smart" investors see a brighter future with FDX than with UPS. I'm assuming that the Teamster contract is ratified giving us several years of defined cost analysis. Comments?
Morning upsoars. In my view, UPS shares will climb/fall on their own without any appreciable impact of corporate buying. You have a huge amount of estate planning and institutional activity that will continue regardless of UPS buybacks and will generate the liquidity that can sustain the share price. I'd like us to buy just enough to keep the outstanding # of shares at a level where the stock options of management are covered. I just cringe when I think the best use of corporate free cash is buying back shares. That is simply playing into the hands of the analysts for whom I have little respect. I also see shares coming back down to earth a bit when the market contraction begins which is inevitable. There are two wild cards I can see that can propel us significantly higher. First is the operational impact of the Orion system. Clearly the potential for mileage and man-hour savings are legion. Secondly, the pursuit by a growing # of states to end the absurd independent contractor status of our major competitor. Seeing them have to compete on a much more fair playing level for their ground operation would stimulate share price and give us a much improved comparative cost structure. The fact that our operating margins are superior to theirs is a real testiment to our management team. Your point on either a real bump up on the dividend is well taken or perhaps an occasional "speclal" dividend to reward shareholders would be good. BTW, what is your prediction for next year's dividend increase. I like $.06 or $.07 but as you know, to keep the yield at near 3% a much higher one would be required. Your thoughts?
UPS has set aside a considerable sum of money for share purchase buybacks. I'd like to think that with shares trading at an all-time high management would determine the timing is not right to buy what may be somewhat overvalued shares in any iffy economic environment to sat y the least. When the Fed decide to curtail its bond buying activity, nearly all economists foresee a correction of somewhere in the neighborhood of 10-20%. This won't effect all stocks across the board but those in the S&P 500 will certainly be impacted by the mutual fund and ETF considerations. At the first sign of a pullback, active traders and institutions will try to preserve their gains and resort to cash positions. If shares were to drop down to the mid-$80's or so then buying shares might be a more reasonable approach. If they never do, my preference would be to deploy the cash towards pension payments, I guess what I'm saying is I'd rather see UPS decide to pay down debt obligations, make contributions to the pension plans, convert more vehicles to natural gas and perhaps identify and purchase more strategic acquisitions than to simply buy shares at an inappropriate time. Thoughts?
if the Orion system matches its expectations level $100+ is the new norm. Absent the soon-to-be resolved union contract, there's a lot of good things happening here. Oil prices down, on-line shipping way up, built in volume from returns, spousal healthcare savings, Europe slowly recovering, healthcare logistics booming, international volume starting to return, solid pension program investment returns and others. There's a reason why both FedEx and UPS are doing so well. BTW, I still see a huge impending legal problem for FDX looming as a result of their dubious independent contractor model in the cross hairs of many state AG's.
Good point about the preload. I've been retired from UPS for quite some time but I remember there had been discussion about preloaders wearing a headpiece and either thru scanning or reading the address into the unit being told exactly where to load the package. In this manner, a generic preloader not familiar with a particular trip would be able to load the car effectively. Any update on this from anybody?
One thing about UPS is that it's been historically regarded as a buy and hold value and income stock. It's traded at a much lesser level than FDX for example considering it's got over 3X the number of outstanding shares. So I should think UPS is comfortable keeping the share value high to lessen churning. Now, if FDX were to make such a move we might reconsider. As we approach $100/share they're already well over $130.
Morning deerrunstoo- just to carry on the thought process of optimal methods use leading to more efficient and profitable business, what do you think about the new ORION system being rolled out? What I liked about the prestart research was the challenge to senior drivers to "beat the computer." The intent was to make sure their knowledge and experience would be incorporated into the process to optimize the mileage and emissions savings. Seems like it's the no left turn concept on steroids.
Understood about the FedEx IC's and that soon to be disgraced business model if the states have their way. In fact, I wouldn't be surprised to see the whole issue collapse into some sort of class action suit. But my point was that people not engrossed in the UPS way of doing business don't know how much productivity/efficiency/profit is involved in the whole "methods" concept. It'slike people thinking the no left turn policy is silly when it saves 10's of millions of vehicle miles and lessens our pollution output.
So today I'm accompanying my mother at the doctor's office when I see the FedEx ground independent contractor get off the elevator. I ask my mother to watch how he handles the delivery from the elevator to the front desk staff. First he stops outside the door, puts the 3 packages (small) down and does an inputting procedure. He then picks them up, comes in the door and proceeds to wait in line behind an elderly couple for about 45 seconds until he's "served.' He completes the delivery and then fishes for his keys before leaving the office. I ask mom what she thought about the driver's approach. She says she thought it was pretty efficient. So I go on to relive some of my past glory by telling about the definitive methods that drivers are taught and how to be tactfully aggressive to get signatures quickly. I suggested to mom that all told he probably wasted about 45 seconds to a minute. She asks, "what's the big deal?" So I simply say ," mom, what's 45 seconds X 120 stops?" After she looks at me for a bit I say 54 minutes. I think she gained a new perspective.