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UPS Reaches Deal With TFI International to Sell UPS Freight

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United Parcel Service, Inc. UPS has entered into a definitive agreement to sell UPS Freight to an affiliate of TFI International Inc.

The move is aligned with the company’s better not bigger strategy. Per UPS chief executive officer Carol Tome, “The agreement allows UPS to be even more laser-focused on the core parts of our business that drive the greatest value for our customers.”

The transaction, valued at $800 million (before adjustments), is expected to close in the second quarter of 2021, subject to customary closing conditions and regulatory approval.

United Parcel Service, Inc. Price

United Parcel Service, Inc. Price
United Parcel Service, Inc. Price

United Parcel Service, Inc. price | United Parcel Service, Inc. Quote


UPS expects the transaction to improve its operating margin and return on invested capital by roughly 20 basis points. Additionally, it will be able to repay its long-term debt and in turn strengthen its balance sheet. With regard to the sale, the company expects to incur a non-cash, pre-tax impairment charge of approximately $500 million for the year ended Dec 31, 2020.

Headquartered in Richmond, VA, UPS Freight is one of the largest LTL carriers in the United States. According to a presentation on UPS’ website, the unit generated an operating loss (adjusted) of $20 million in 2018. The unit’s adjusted operating profit in 2019 was $75 million. In 2020, the company expects the same to be $39 million. Further, it estimates the unit to generate revenues of $3.15 billion in 2020.

UPS stated that it will also enter into a five-year agreement with TFI International, so that UPS Freight continues to utilize UPS’ domestic package network to fulfill shipments.

Zacks Rank & Key Picks

UPS carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Transportation sector are FedEx Corporation FDX, GATX Corporation GATX and Herc Holdings Inc. HRI. While FedEx and Herc Holdings sport a Zacks Rank #1 (Strong Buy), GATX carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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United Parcel Service, Inc. (UPS) : Free Stock Analysis Report

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