I think the going forward confidence is really helping us now. Perhaps investors are smart to look at individual stocks vs. the indexes right now. If we can add an 8-9% dividend increase soon it will really be a show of strength.
How many companies are able to say they smashed earnings expectations, would have beaten revenue except for currency/turning down sales (additional volume at peak), issued 2016 projections that exceeded analyst's expectations and will probably increase a healthy dividend payout by around 9%? If the market weren't in a temporary free-for-all malaise we'd by close to triple digits.
I think when the smoke clears investors will note that while many other companies have issued bleak forecasts UPS indicated it expects to exceed what the analysts had been projecting for 2016. It's just a shame that our results came out on a down market day. The pre-market was much better and then the regular trading day began.
I'm also concerned with the going forward. The blizzard on the east coast can't be particularly helpful to start 2016 either. I'm very curious to hear about the DIM weight impact on peak as well as any Amazon discussion. But Ryan makes a good point about comps getting easier too. BTW, seems like the market is voting for a nice earnings report tomorrow (at least 1/2 hour before close it is).
Exact opposite is true. Free cash flow has always been a strong point. There is a question about whether we should keep pace with the recent 8-9% increases. I think the earnings call will make that issue more clear with the going forward advice being key. In my mind, we'll be reporting a solid peak season but by now that is old news. It's the future that will grab investor's attention.
If an investor had to look at sectors to buy into, it appears that utilities, communications and consumer discretionary might be the selections. UPS with it's 3%+ dividend almost acts like a utility is some ways. FDX of course does not. However, unless UPS warns about 2016 expectations at the upcoming earnings call, one would think the small package players would continue to thrive with retail online ordering. FDX with it's "lucky" move in Europe via the TNT transaction should be in a pretty good place. But despite all this, these 2 companies are way low on forward P/E's. UPS sits well below 16 and FDX below 11. So, both should fit into the value play investing mode that the talking heads keep saying is the new market direction.
In a few weeks, we'll get our first hints at evolving UPS strategy. With Amazon's recent moves and the EU's dubious no conditions approval of the TNT takeover, UPS must be laying out responses to both in future planning. By acquiring TNT, FDX is almost equal to UPS in market share once they have integrated operations. In the U.S., there has been an alarming trend of FDX routes providing faster service than UPS and that needs to be addressed. UPS has its challenges and I'm sure is prepared to meet them but it's not going to be easy.
UPS is they don't change guidance is looking at a forward P/E of 16. FDX is 11. Those are historically cheap P/E's. Maybe for many companies their share price is high but not these 2 companies.
We need to address 3 things well. First, a solid peak season report superior to FDX's. Secondly, we need to confirm our going forward advice. Thirdly, there should be some prepared discussion for how we are working with Amazon in the future and how the FDX acquisition of TNT will be competitively addressed. It would be nice to hear forceful confidence with some sort of master plan- similar to the 3-year efficiency plan that FDX is just completing. Investors need to know that we're proactive not reactive.
Mcf- I'm a bit worried about the after-effect of this TNT purchase long-term. One of the UPS competitive advantages was its dominant position in Europe. FDX was stronger in China and now be well on their way to equal footing in Europe as well. Interesting how this will play out. But, for what it's worth, I can't understand why the EU didn't make FDX at least give up some consolation somewhere. It almost feels like a conspiracy. We need more pep in our step from the P/R, business development side.
UPS makes a play for TNT, is denied buy EU for anti-competitive purposes and pays a hefty break-up fee to TNT. FDX walks thru the open door, makes a lower bid for TNT and gets approved with no strings attached. I guess there's fairness there somewhere.
Looking at the forward P/E's, there's an interesting turn of events in our sector. If FDX's projections hold up, A BIG IF, they are sitting at around an 11.2 going forward P/E. They have some serious issues on their plate including tough timing for the TNT acquisition with turmoil in international markets, ongoing legal issues with their IE business model and what is potentially an over commitment to Boeing plane purchases. Their growth engine is slowing down. Meanwhile, UPS has a forward P/E of just around 16. While I suspect we'll report a solid Q4, it will be hard for us to justify prior profitability projections. Diminished fuel surcharges, currency issues and lack of international demand should be hard to overcome. But, when is the last time that when comparing FDX and UPS, it could ever be stated that FDX would be the value play? Of course there is that nice little UPS dividend perk!
Just to take our minds off a really dour market day, here's some projected dates for UPS investor info. Last year, UPS issued a pre-release of expected Q4 results on 1/23. The Q4 earnings call was on 2/3. On 2/11 they announced a dividend increase of $.73/quarter up from $.67 or just under 9%. Ideally, unless the market/economy implodes, we will have much more positive things to say both for peak season and going forward. I'm guessing $.79 will be the new dividend particularly with the bit of uncertainty which seems to be spooking the market so far in 2016. Thoughts?
You're right Ryan. Maybe they're waiting fora ll the smoke to clear before issuing a peak season summary review prior to the CC. But it is a bit perplexing when the other 2 talk about blow out volume and we don't. Blow out volume vs. weather conditions are 2 different things and, at the end of peak, FDX seem to have experienced both. Memphis weather was awful and Louisville was OK. But if memory serves, we mentioned hiring 95K peak season staff and if we did that with just a modest increase in volume, one gets a bit nervous. On a positive note, O/T should have been less. Basically though, I'm sick of guys like Donald Broughton of Avondale Partners getting all that TV exposure to praise FDX while always finding a way to denigrate UPS. Somehow our P/R has to raise it up a notch.
You're right HD. Interesting things going on this year. With all the on-line headline grabbers like porch pirates and stuff now you have things previously unheard of like people calling 911 because they see a UPS u-haul delivering packages. What used to be a good sign that UPS is taking the steps to manage volume is now being made into receiver concern issue. I still would love to know how the Post Office is faring with all the last mile activity. Delivering on Saturday and Sunday can only address the volume expansion so fr.