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UPS Launches New Service Offering

Zacks Equity Research

United Parcel Service Inc., (UPS) the leading international freight delivery company has launched a new express airfreight service ­­— UPS Worldwide Express Freight. The new offering is part of the UPS Worldwide Express package portfolio that distinguishes shipping experience between express package and express freight.

We believe the introduction of new service offers would attract new customers and help in retaining the existing ones, thereby boosting revenue growth for the company.  

UPS Worldwide Express Freight services would involve services similar to express package and customer can ship within UPS' global air network to 41 countries. The new service also promises the fastest service time of 1–2 day shipping to Canada, as well as 1–2 day shipping from Canadian to international destinations.  

We believe the company’s integrated sales approach also promises future growth, given its industry-leading margins and financial strength. The company is also seeking capacity adjustment by reducing Asian air networks to improve its cost structure.

Further, its focus on continued productivity gains, improved operating profit, and strengthening liquidity position amidst economic challenges are encouraging. Given these positive factors, the company expects fourth quarter earnings in the range of $4.55 to $4.65 per share, up 5% to 7% year over year.

For the coming quarters, UPS’ profitability level is expected to be boosted by a healthy performance in the Supply Chain and Freight segment, strong export volumes in International Package and improved margins in Domestic Package. We believe that over the long term, the company will continue to invest in technology and network enhancements, which would provide a competitive edge over its peers like FedEx Corporation (FDX).

However, risks such as labor unionization, large European exposure and competitive threats from peers will likely keep the stock under pressure.

UPS currently retains a Zacks #3 Rank, implying a short-term Hold rating for a period of one to three months. We also maintain a long-term Neutral recommendation on the stock.

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