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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