United Parcel Service (UPS) Unveils Transformation Plan
In a bid to generate additional revenues and also reduce costs, United Parcel Service Inc. UPS revealed its transformation plan at an investor presentation in New York. As a result, the company anticipates adjusted earnings per share to increase (on an incremental basis) between $1.00 and $1.20 by 2022.
The company further said that it will continue rewarding shareholders by virtue of reinvesting savings generated from the initiatives. Moreover, it will continue with its strategy of expanding in international markets offering high-growth potential.
In order to ensure a successful holiday season in 2018, this Atlanta, GA-based package delivery company intends to complete 17 projects by the time the peak season arrives. As part of its transformation initiatives, UPS also plans to focus more on the Healthcare and Life Sciences logistics market owing to increasing importance of home healthcare.
At the conference, the company stated that it anticipates cross-border e-commerce volume to grow by 28% over the next three years. In fact, UPS, like rival FedEx Corporation FDX, is making significant investments to upgrade its facilities for meeting the surge in demand, following rapid growth in e-commerce. Capital expenditures at UPS for the current year is projected between $6.5 billion and $7 billion, bulk of which will be directed toward new technology, aircraft and automated capacity.
Shares Fall on Business Update
UPS stock declined 2.9% on Sep 13 to $119.70. The reason for the decline might be the company’s commentary that it expects to generate annual savings between $800 million and $1 billion from its capital spending plan. It seems that the company’s expectation failed to meet investors’ expectations resulting in the stock shedding value.
In fact, the disappointing performance of the UPS stock is not limited to Sep 13. Shares of the company have declined 0.3% over the past month, underperforming its industry’s rally of 1.5%.
Zacks Rank & Key Picks
UPS carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are SkyWest, Inc. SKYW and Trinity Industries, Inc. TRN sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of SkyWest and Trinity have rallied more than 54% and 21%, respectively, in a year’s time.
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