Question

In regards to the company United Parcel Service (UPS), complete an analysis of the industry that they are in, assess the industry as a whole, or at least analyze three of their major competitors. In this assessment you should look at current news of the industry, trends of the industry, and analysts expectations for the industry, etc… You should also find an analyst’s or two options on where the industry is heading.

Please cite the article or articles this information was found

Answer 1

Answer:

United Parcel Service (UPS)

United Parcel Service, Inc. (UPS), incorporated on July 15, 1999, is a package delivery company. The Company is a provider of global supply chain management solutions. The Company operates through three segments: U.S. Domestic Package operations, International Package operations, and Supply Chain & Freight operations. As of December 31, 2016, the Company delivered packages in over 220 countries and territories. WorldShip, a desktop shipping application of UPS, provides middle-market and customers with shipping capabilities

Business Growth

• Revenue: Revenue increased from $45,297 million in 2009 to $1 billion in 2010. For the second quarter of 2011, revenue increased 8.1% to $13.2 billion compared to $12.2 billion in the second quarter of 2010.
• Net income: Net income increased from $2,152 million in 2009 to $3,488 million in 2010. For the second quarter of 2011, net income increased 25.8% from $845 million in 2010 to $1.06 billion.

the company has been recording lower growth rate recently

Competition

UPS has three major competitors. The services offered between them are identical, though prices and availability in different regions vary.

Deutsche Post AG:

A privately held company, Deutsche Post AG competes with UPS through its DHL operations. Overall, DHL-branded businesses account for more than half of the parent company's sales. However, most of Deutsche Post's sales come from outside its home country. Deutsche Post still handles the mail in Germany, delivering an average of 70 million letters per working day. In addition to traditional postal operations, the company provides mail process outsourcing at home and abroad.

United States Postal Service:

USPS is also not traded publicly. It is an independent government agency that relies on postage and fees to fund operations. USPS handles all kinds of mail and ships domestically and internationally. The USPS delivers more than 200 billion pieces of mail a year (at an average of more than 650 million per day) to some 150 million addresses in the US and its territories. Though it has a monopoly on delivering the mail, the USPS faces competition for services such as package or freight delivery.

FedEx (FDX):

FedEx and UPS are close competitors in almost every way. FedEx offers every service offered by UPS, including freight services. FedEx Corporation provides transportation, e-commerce, and business services in the United States and internationally. It operates in four segments: FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services. The FedEx Express segment offers various shipping services for the delivery of packages and freight. This segment also provides international trade services specializing in customs brokerage, and ocean and air cargo distribution; customs clearance services, as well as global trade data. However, the scale of operation between FedEx and UPS are different.

United Parcel Service:

In this final part of the series, we’ll look at the stock trends and returns of United Parcel Service and its peers. But first, let’s consider this. In 2017, the company’s holiday season volumes soared 20%, which was far above management’s expectations. These volumes fully exhausted the maximum capacity of UPS’s facilities.

The peak season service issues have forced UPS to invest heavily in infrastructure. In its 4Q17 earnings call, UPS noted that it’s planning its largest network expansion program in recent history. As a result, its projected capex (capital expenditure) in 2018 is a whopping 35% higher at ~$7 billion, from $5.2 billion in 2017. This is a significant investment that could expedite its growth in the long run.

Performance of UPS stock

On February 14, 2018, UPS stock closed at $106.60. The 52-week high is $135.53, and the 52-week low is $102.12. That means the current price level for the stock is near to its 52-week low. In the mass sell-off period last week, UPS stock fell 16%. Since the beginning of 2018, it has fallen 10.2%. Its prime competitor, FedEx, has fallen 3.3% as of February 14, 2018. Let’s see how UPS’s year-to-date returns stack up against its peers:

• Old Dominion Freight Lines (ODFL): rose 3%
• Saia (SAIA): rose 2.8%
• XPO Logistics (XPO): fell 0.12%
• YRC Worldwide (YRCW): fell 31.1%
• ArcBest (ARCB): fell 8.3%

The SPDR S&P Transportation ETF (XTN), which holds 24.4% in trucking companies, fell 2.8% during the same period.

Management expectations

For 2018, United Parcel Service anticipates the midpoint of its adjusted EPS to be $7.20, indicating an estimated 20% growth. Last year, its adjusted EPS growth was 5% based on its EPS of $5.75 in 2016. The double-digit expected EPS growth has factored in the possible benefits of the new tax reform legislation.