Seidman Investment Portfolio Organization

 

Company: United Parcel Service, Inc.
 
Sector: Industrials (NYSE:UPS)

UPS is the world's largest package delivery company, in terms of revenue and volume, and a global leader in supply chain solutions.   UPS currently controls over half the U.S. package-delivery market and has recently begun significant expansion overseas, especially in China. Currently, UPS has acquired the interest held by its joint venture business partner in China, giving it access to 23 cities that cover more than 80% of the country's international trade. According to various sources, UPS is negotiating to buy TNT N.V., Europe's second largest express delivery service.  These and future expansions would result in a dramatic revenue increase for UPS.

Current economic conditions have caused a dramatic increase in surcharges which are sending customers away and forcing them to find cheaper methods of package delivery. Management is seeking innovative ways in order to reduce these costs. UPS has agreed on a deal to avoid furloughs for over 300 of its pilots. The deal will target cutting costs of $131 million over the next 3 years. New technology is also being implemented to improve its delivery system for faster delivery.

 UPS currently trades at a premium relative to the industry and its competitors, which include FedEx and USPS. UPS's valuations are likely supported by the expectations of future growth from international expansions and acquisitions accompanied by its continuous strong operating efficiency.

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Page last modified March 11, 2012