A 10% increase which has been the norm for the S&P would be just over $.68. So, I'd be happy with $.69 or $.70 but think anything higher than that might just be wishful thinking.
There has been some discussion concerning the companies that would most benefit from the strong 2013 stock market performance. Companies that had previously made the switch to mark-to-market accounting for their pension programs will be the beneficiaries of a big advantage. We're one of them.
While I agree about packages never being left in the delivery center before all management employees went home for Christmas and participated as well, clearly that was not the problem. The issue was packages never getting to the delivery facility but rather being caught up in sorting hubs and the like. I don't believe the problem was at the delivery end but rather in the processing and sorting phase. I'd like to think that all packages that got to the delivery centers were out for delivery. The upcoming earnings report will certainly clarify that. So in effect, we had a good news/bad news peak season. Terrific volume but bad weather leading to untold service failures. I'm not sure perfect planning could defeat the snowball effect of weather issues. Personally, being in the Philly area I received several packages without an issue. I just wish FDX, which experienced the same delivery failures would get the same level of bad press that we're getting. Beyond that, could this be further proof that the Sports Illustrated "cover curse" is more than just a myth? We were on the cover of Bloomberg BusinessWeek and look what happened? Let's just hope our relationship with Amazon is not fractured.
The nation's airlines all have an horrific time dealing with weather issues. It's an accepted axiom of the industry that weather issues cause major transportation problems. Do people blame the airlines for total incompetence when these inevitable events occur? Just like with UPS, when there is a spate of bad weather in certain key regions of the country, the snowball effect on flights nationwide is dynamic. Clearly some bad weather (ice, snow) started to impact operations. As someone mentioned on another thread, when you have delays due to weather, the DOT hourly driving standards start to be impacted and operators can't address the problems ideally. These are the things that start to snowball. Throw in the pressure on the retailers to "save" their holiday sales numbers by offering last minute delivery and it becomes easy to blame the carriers. In my view, the phenomenon of on-line volumes being much, much greater than even the industry professional prognosticators projected is a large part of the explanation of service failures. We should recall that the very unique compressed shopping time between Thanksgiving and Christmas played a significant role. Our upper management stated early on we needed to rely on decent weather or some issues may arise. They were spot-on in that analysis. The good part is that peak season volume numbers will be extraordinary. The bad part is we will be reimbursing some of our major clients (or providing more discounted shipping fees) for awhile to get back into their better graces. But just imagine, if Amazon had gone with FDX to the same degree they had gone with UPS, their ground fleet would have been completely overwhelmed since it's 1/3 the size of ours. Maybe the ultimate lesson learned is for customers to order earlier and not expect late Christmas delivery miracles.
Excellent points. BTW, I got the feeling that the couple of times that the $5B or so "available cash on the books" reference was brought up it sounded VERY good for a substantial dividend increase. No planes are needed to add to our youngest in the industry fleet and share buyback allotment is slightly less than lest year. So, it portends 10% plus vs last year's 9% or so. Also, investors and analysts have to like the huge investments coming in hub facilities, technological advancements within the hubs to reduce intellectual requirement (training and memorization) meaning less investment in the classroom, knowing what is within trailers coming from bigger customers during peak and, of course the expanded and accelerated roll-out of Orion. I thought they handled the earnings call ideally and took full advantage of addressing that the difficulties of peak 2013 will spur much better outcomes for 2014. The turned a negative into a positive very effecttvely.
Clearly we had problems but time has a way of rationalizing the whys and the wherefores. What can any organization do about wildly underestimated volume from key customers and the weather conditions that prompted so many to shop on-line adding more packages to the mix? Now we're at the stage of drawing dollar and cents evaluations of the experience. No doubt revenues will be thru the roof. There will be some level of customer reimbursements but it will be modest compared to he significant revenue boost. In addition to the huge peak, we will be announcing far better than projected full year results from our pension investments and the accounting process. We have not formally announced any type of cost reduction program like FDX has been benefiting from by the tune of $1.6B. They reduced headcount by 3,600 and, who knows, we might consider doing the same thing. Why- their share value increased 53% during 2013 largely on the heels of the announcement. I think UPS will reward shareholders with a larger than usual dividend increase that will be announced in early February if not before. By doing so, they reward both present employees and loyal shareholders. I really hope they minimize share buybacks unless they can buy from institutions at discounted prices. Either way things shake out, it's hard to imagine anything short of am EPS beat, revenue beat and forward guidance enhanced- a hat trick by any measure.
Personally, I'd like us NOT to split for a few reasons. First, when the share price is over the $100 threshold there is much less rapid trading activity. From my view I think that's good as it attracts the institutional and buy and hold buyer vs. the program crowd. Since fewer shares are traded they become harder to obtain thus raising the valuation somewhat. Secondly, we already have around 940K shares outstanding. If we did a 2 for 1 split, we'd be closing in on 2 billion. Third, I think it's important that we keep some degree of comparative pricing to out major competitor FDX. While I disagree vehemently with the differential in the present share price of each, it's a measurement that is meaningful. Just my opinion...
Before I even get into some of the salient stuff, this morning I read where CEO Scott Davis holds about 297M shares of UPS. So it's easy to calculate that the value is around $295M give or take. So a lifelong career and a nice stretch as the top company official has rewarded him to that degree. Meanwhile, the hard working William Shatner has been compensated for his "Priceline" advertising campaign to the tune of shares worth $600M! Something to digest when musing about who is overpaid. Moving on to the dividend, here's my latest thinking. I should think that a 2.75% payout is about right. So, with a $98 price basis, $2.70 would be the number. In my view that would be the LOWEST number and anything between that and $2.82 would be reasonable. I'd have to think that the Q4 difficulties has had a conservative effect on that analysis.
Peak was tough. A number of elements that we all know about caused chaos. That chaos is continuing into 2014 with yesterday's major storm and the bitter cold. A large swath of the business community is impacted from retailers to airlines to delivery companies. To suggest these conditions are some sort of an "excuse" come earnings CC time is absurd. It's part of why companies provide a range for EPS. UPS expects to up the EPS by 10-15% in 2014. That's solid growth. We are sitting on an average $110 one-year price target by analysts. Personally, I'd be very happy with that. So, we survived a chaotic peak, learned a lesson for the similarly calendared 2014 and will be popping up the dividend- and who's upset by all this?
Disappointed to say the least. I just hope management is astute enough to buyback shares at dips in the share price. Personally, I'm always leery of any company buying back shares in an effort to rise the EPS. Granted some are needed by treasury for options/bonuses etc. but I cringe in simply going on a buyback spree. I'd much rather they pursue immediately accretive acquisitions like the one announced earlier this week. So, is any one else super enthused by a nickle increase and about 2.7% as a new ratio? Oh- one more thought. Since so many present employees hold shares, I think a $.07 or so increase would have been a nice reward for struggling through some very, very difficult weather in the last few months. JMHO....
FWIW, just imagine if Amazon had exceeded analyst's expectations??!! As it was, JUST LIKE US THEY SCREWED UP THEIR PLANNING PERMITTING CUSTOMERS TO SHIP WAY TOO LATE IN THE SEASON WITH NO COMPELLING REASON TO ALERT THEIR DELIVERY COMPANIES IN A REASONABLE WAY. Now I feel better...
Interesting that the only FDX "warning" comes from CitiGroup. How can it be that FDX would appear to prefer to simply announce a poor Dec/Jan/Feb quarter on the 19th without preparing the investment community for a lackluster report? Maybe they'll just make a bombastic going forward pitch? Seems strange to me.....
What I liked most about the article was the clear indication that absent the strong performance of the FedEx ground operation comprised 90% of the company's growth. This plays right into the ongoing thesis that when the attorneys general of several states get the FDX independent contractor business model into the legal system Mr. Genius corporate America business leader, Fred Smith, will get knocked down from his undeserving perch. How this guy still commands the respect as an innovative and dynamic business leader is beyond my comprehension. How he avoids getting publicly called out on the I.C. issue amazes me. The I.C. issue is perhaps the dominant consideration when it comes to how counties and states can generate lost income and cut expenses not properly incurred. But that aside, absent the EPS adjustment last year caused by the late October Hurricane Sandy, the EPS of FDX only increased by 4.7% and missed analyst's expectation by $.06. This despite an ongoing cost reduction initiative consisting of buy-outs and plane retirements resulting in reduced repair and maintenance costs. They even had the advantage of reduced fuel costs as a bonus. So, the Motley Fools think UPS has performed better thus far in 2013 and we'll soon see when we report next month. From all indications, this has been a solid peak season and if we can get thru Monday and Tuesday without any disastrous weather (although this weekend might prove nasty around Kentucky) things are really looking up. What's really good is that the returns that are generated thru the huge utilization of mail order shipping give us that little boost that helps 1st quarter volume get a nice boost. BTW, I'm convinced that we'll see at least a $.07 increase in the dividend just to keep us somewhat close to 3%. We can thank the GE's and other large companies who have recently increased their dividends substantially for this scenario.
There has been a lot of discussion on the impact of service delays in the UPS Q4 performance and so far into 2014. Given that fact, it's worth noting a few things. First off, BOTH UPS and FDX issued advisories concerning service guarantees for the time frame from 12/11 to 12/24. UPS for 12/31 as well. In addition,. both companies expanded their air delivery window by 90 minutes. No doubt there will be some level of negotiating with our larger customers over the dynamics surrounding this peak season and clearly all concerned learned vital lessons to be applied next year when the December calendar is very similar and the holiday season will again be compressed. Realistically, even the most casual observer will note that delivery companies of all sizes have been severely impacted by the relentless weather conditions that have been experienced by much of the country. As much as you like to provide superior service at all times, I'd like to state that few other category of employees have had a tougher environment to do their job than those folks who deliver goods and the post office carriers. To think that those companies who utilize these delivery services would focus on weather-induced failures vs. the extraordinary conditions under which these men and women have been performing their jobs is unsetttling. But I guess we'll see.
The late surge of on-line volume AND the weather. But think about it, many parts of the country had lousy mid to late December weather and so folks just sat home and typed in an order request and expected everything to go perfectly. Did UPS management under-predict peak season volume? Absolutely! Was this peak season unlike any other on company history? Absolutely? C'mon guys, anyone who worked at UPS would remember when the peak days used to be and it certainly wasn't as close to Christmas day. As the release said, UPS went to extraordinary lengths to procure staff and equipment to meet the ever-building surge and simply couldn't do it. Sometimes too much is simply too much. That said, the real key here is the going forward advice remains in place. Lessons were learned, future planning will be improved and the odds are the weather couldn't be any worse next year. BTW, this is not just a UPS-only issue. Expect FDX to discuss some of the same issues in their next report. Oddly enough, their quarter ending November may have allowed them to end 2013 and the start of 2014 as it relates to share price in a better place. Their time is coming though.
FDX has their next earnings CC on March 19th. It includes the months of December, January and February. So, they will have to admit to an overwhelmed peak season just like we did and follow that with a discussion about how the severe weather has been impacting operations. As a result, I expect shares of both FDX and UPS to decline with UPS dropping to the low $90's. That's actually temporary good news for those folks with $95 calls expiring in April. Again, it would seem logical for a 10%+ dividend announcement to come any day now.
one of my first questions would be how do you project the really poor weather conditions in key metropolitan areas of the country will impact your Q1? Then I'd ask how much progress we've made in repairing our relationship with Amazon? Then I'd ask about the impact of the pension mark-to-market going forward? Then I'd ask about any cost savings program on the horizon and the impact, if any, at this juncture of Orion? At this point, I think I'd be in a decent position to read the tea leaves for Q1 and beyond.
norjoa1- FDX will be reporting a double whammy. First though I wouldn't be surprised if they issued an earnings warning downgrade any day now for their Q3 (Dec, Jan, Feb). As we all know, FDX does not report their peak season like we do. Theirs is part of the upcoming earnings call. Yes, I agree with mljt that ALL transportation companies will be experiencing real service issues for at least January and February. Delays, inefficiencies and overtime have to be thru the roof. The thing is, when so many of the major urban centers are impacted, the weather is no longer viewed as an "excuse" but rather a reality. For comparative purposes, my mail delivery has been abysmal for weeks now. Wait until you see the airlines and retailers results. I just have my fingers crossed that a 10%+ dividend increase is still in the cards.