UPS' Solid Delivery

I won't even call it bad news, just big news, but we need to deal with it up front for an understanding of United Parcel Service's (NYSE: UPS  ) quarter: The company took a $6.1 billion charge for the December-ended quarter as part of the new contract it inked late last year with the Teamsters' union. As a result of that one-time item, its per-share earnings amounted to a loss of $2.46 per share, compared to earnings of $1.04 a year ago.

But if you back out that charge, which, believe it or not, is a positive thing for UPS because it ultimately will lead to lower people-costs and more financial predictability, the company earned about $1.13 per share in the quarter. Revenues increased to $13.4 billion, up from last year's $12.6 billion.

Beyond that, all the company's operating units -- U.S. Package, International Package, and Supply Chain and Freight -- checked in with higher revenues. Management is guiding to a $0.94 to $0.98 EPS range for the first quarter.

With its human resources costs at least mostly under control, management recognizes that one of its remaining gray areas is escalating fuel costs. Indeed, as CFO Kurt Kuehn noted on the company's conference call, "Fuel was absolutely a head wind, and without that head wind, our results would have been better..."

But taking something of a 30,000-foot perspective on UPS, I find the company intriguing for its international scope and some of the new initiatives it's recently undertaken. The latter include its newly announced reassessment of its optimum capital structure. At the same time, it clearly joins a number of disparate big companies that will likely perform far better outside the U.S. than inside -- at least for the time being. That list is comprised of the likes of DuPont (NYSE: DD  ) and UPS' delivery mate, FedEx (NYSE: FDX  ) .

For now, as I consider UPS, I'm happy to reflect on its new approaches, and to add in its return on equity in excess of 25%, its still-strong balance sheet, and its 2.3% dividend yield. It's a combination that makes the company difficult to ignore.

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12/17/2014 2:39 PM
UPS $108.28 Down -1.55 -1.41%
United Parcel Serv… CAPS Rating: ****
DD $70.10 Up +1.48 +2.16%
E.I. du Pont de Ne… CAPS Rating: *****
FDX $168.15 Down -6.11 -3.51%
FedEx CAPS Rating: ****

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