Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



UPS: Not Going Down Just Yet

With the U.S. economy continuing to slide, a key barometer -- the press prefers the term "bellwether" -- has delivered its latest quarterly results: Global shipping giant extraordinaire UPS (NYSE: UPS  ) has joined its package-toting peer, FedEx (NYSE: FDX  ) , which last month told us that its revenues had in fact risen, but its income had gone the other way.

In the case of Atlanta-based UPS, earnings per share fell 18.3%, despite a 6.7% bump in revenues. The culprits, if you've been incommunicado for the past year or two, were higher fuel costs and flat delivery volumes.

But before you get the sense that all parts of the company are sucking air, the Supply Chain and Freight unit managed to grow its operating profit by about 50% on higher revenues and margins. At the same time, the U.S. Domestic Package and International Package segments both faced double-digit percentage drops in operating profit, with the U.S. unit seeing that figure slide by 24% year over year.

All in all, the quarterly results weren't especially surprising. A month ago, UPS warned us about the softness. And it also won't be surprising when the company's full year profit is below what might have been expected until very recently. In fact, as management told us about the most recent quarter, it also hit the brakes again on guidance, this time trimming full-year guidance down to $3.50 to $3.70 a share.

UPS announced a couple of months ago that it's working on a deal to carry some packages for DHL, the U.S. arm of Deutsche Post AG. Assuming the deal is inked -- and CEO Scott Davis told his conference call audience that, "Both sides are working diligently and making good progress towards concluding this agreement." -- it'll likely add about $1 billion a year to UPS’ revenues.

Trends at UPS could bear a relationship to a whole host of companies for whom shipping is a big part of their business.  For instance, flat to down U.S. shipping volumes, not to mention higher shipping costs, certainly don’t read as positive leading indicators for the likes of (Nasdaq: AMZN  ) and 1-800-Flowers (Nasdaq: FLWS  ) .  

As to our shipping friends, UPS and FedEx are both terrific, nicely managed companies. But until the economy begins to shake off its lethargy and fuel prices become less of an issue, I'm inclined to keep both at arm's length.

For related Foolishness:

UPS is a Motley Fool Income Investor pick, and FedEx is a selection of the Stock Advisor team. Try either market-beating newsletter service free for 30 days.

Fool contributor David Lee Smith doesn't own shares in any of the companies mentioned above. He does welcome your questions, comments, or packages. The Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 689994, ~/Articles/ArticleHandler.aspx, 10/26/2016 7:59:34 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 10 hours ago Sponsored by:
DOW 18,169.27 -53.76 -0.30%
S&P 500 2,143.16 -8.17 -0.38%
NASD 5,283.40 -26.43 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/25/2016 4:01 PM
UPS $107.84 Down -0.61 -0.56%
United Parcel Serv… CAPS Rating: ****
AMZN $835.18 Down -2.91 -0.35% CAPS Rating: ****
FDX $171.93 Down -0.15 -0.09%
FedEx CAPS Rating: ****
FLWS $9.59 Down -0.04 -0.42% CAPS Rating: **