UPS: "Go Global"

06/16/2016 8:00 am EST


Ingrid Hendershot

Founder and President, Hendershot Investments, Inc.

In 1907, the 19-year old Jim Casey borrowed $100 and established the American Messenger Co. in Seattle; today, it is one of the largest transportation firms in the world, notes Ingrid Hendershot, a value investing money manager and editor of Hendershot Investments.

In 1919, the growing company made its first expansion beyond Seattle and adopted the name United Parcel Service (UPS).

Today, UPS operates an international network serving more than 220 countries and territories, with international sales accounting for 22% of total revenues in 2015.

UPS is uniquely positioned to assist other companies as they “go global.” Economies of scale, excellent customer service and operating efficiencies translate into high profitability for the firm.

Since going public in 1999, UPS has parceled out brown boxes of free cash flow to shareholders via dividends and share buybacks, which have totaled more than $58 billion.

UPS increased its dividend 7% in 2016 to an annual rate of $3.12 per share with the dividend currently yielding an attractive 3.1%. The company has either increased or maintained its dividend every year for 47 years.

The board also recently reauthorized the company’s existing share repurchase program in the amount of $8 billion. Over the past five years, the company has repurchased $14.3 billion of its own shares.

During the first quarter of 2016, UPS generated $2.7 billion in cash from operations, paid dividends of $670 million and repurchased 6.8 million of its own shares for about $680 million, or $100 per average share.

UPS delivered first quarter sales of $14.4 billion, up 3% year-over-year, with net income of $1.13 billion, up 10% and EPS of $1.27, up 13%.

Given the momentum from this quarter’s solid revenue growth, improved network efficiencies and substantial operating profit growth, management reaffirmed guidance for 2016 full-year EPS of $5.70 to $5.90 -- an increase of 5% to 9% over adjusted 2015 results.

Long-term investors should package up UPS for their portfolio. UPS is a high quality, highly profitable market leader with strong cash flows, an attractive dividend and a solid outlook for growth in 2016.

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By Ingrid Hendershot, Editor of Hendershot Investments

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