On Jul 5, we maintained our Neutral recommendation on
United Parcel Service Inc.
). The company's improved business-to-customer (B2C) services,
rate hikes, planned investment program and profitable alliances
bear evidence to its strength. However, several headwinds
could impede its operating results going forward. This
transportation and logistics service provider holds a Zacks Rank
CH ROBINSON WWD (CHRW): Free Stock Analysis
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UTD PARCEL SRVC (UPS): Free Stock Analysis
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We believe that United Parcel stands tall with a focused approach
towards expansion, various strategic measures, collaborations
with other leading firms, a well-defined business model and
constant technology upgrades. The company's policy of increasing
freight and general rates on a regular basis remains a key driver
for yield expansion in the current market scenario.
United Parcel is targeting to tap the growing opportunities in
the health care business sector. With distribution units
dedicated to health care in the key markets of North and South
America, the company now plans to open health care distribution
facilities in the emerging markets of China, India and Japan. To
fortify its presence in Europe, United Parcel is set to acquire
Hungary-based pharmaceutical logistics company CEMELOG Zrt.
To foster growth, United Parcel aims to invest about $500 million
toward new technology and facility expansion over the next few
years in markets including France, Latin America, Vietnam, China,
and Korea. Additionally, the company launched a new shipment
monitoring and risk management solution - UPS Proactive Response
(TM) Secure. We also appreciate the company's efforts to enhance
shareholder returns through higher dividends and share buybacks.
Nevertheless, we remain skeptical about United Parcel's near-term
performance due to labor unionization issues, various market
risks, high pension expenses and competitive threats from
Expeditors International of Washington Inc.
CH Robinson Worldwide Inc.
The second and third quarters of 2013 have the Zacks Consensus
Estimate for earnings pegged at $1.19 and $1.24 per share,
respectively. This reflects year-over-year growth of 3.8% for the
next quarter and 16.5% for the third.
Companies operating within the transportation sector that are
worth taking note of include Zacks Ranked #2 (Buy)
Kansas City Southern