BrowntailWhale
10th Nov 2009, 15:49
United Parcel Service is looking for acquisitions to bolster its supply-chain and freight-forwarding units, Chief Executive Officer Scott Davis said. UPS has made more than 40 purchases in the past decade, and there are “likely to be some more” in the coming year, Davis, 57, said today in an interview in New York. China, India and the Middle East are at the “top of the list” for expansion, as is the health-care industry, he said.
“We’re strengthening ourselves in emerging markets, the Middle East, Asia, areas where we think we can invest and grow,” Davis said.
Supply-chain services help companies order inventory and parts, and move finished goods to their customers more efficiently. Businesses use freight forwarders when sending heavier items across long distances or borders, or to ease transfers among trucks, trains, ships and planes.
UPS’s supply-chain and freight-forwarding operations are its smallest business, accounting for 17 percent of 2008 sales. The rest of the Atlanta-based company’s revenue came from domestic and international package shipments.
“There are lots of freight forwarders and logistics companies overseas, it’s very fragmented,” said David Campbell, a Thompson Davis & Co. analyst in Richmond, Virginia, who recommends buying UPS shares.
“UPS is probably getting to the point where they feel they should be
more aggressive in snapping some of these up.”
UPS also wants to expand its services for handling health- care products, Davis said.
The company built new facilities in the Netherlands and Puerto Rico to handle temperature-sensitive medicines and drugs that need special security. UPS has more than 3.5 million square feet (325,160 square meters) of space dedicated to health-care customers such as Merck & Co.
Valuations for acquisition targets have declined as business owners “become more realistic,” Chief Financial Officer Kurt Kuehn said. Inflated prices and the recession are among the reasons “we haven’t done any big home-run acquisitions” in recent years, he said.
UPS’s largest recent deal was the 2005 purchase of Overnite Corp. for $1.25 billion in cash to expand its freight unit. Overnite is a so-called less-than-truckload carrier, hauling goods from more than one customer in the same trailer.
That’s not an area where UPS is looking for more acquisitions, said Davis, who was at the New York Stock Exchange to mark the 10th anniversary of the company’s initial public offering.
“We’re happy with the network we’ve got,” he said.
Davis also disclosed that UPS holds an 80 percent stake in a joint venture unveiled earlier this year for package shipments in 20 countries including Iraq and Egypt. The transaction included buying Turkey’s Unsped package-delivery firm, whose executives will oversee the venture.
UPS is considering whether to resume giving earnings forecasts on a full-year basis, Davis said. The company switched to quarterly outlooks in 2009 because of the recession, he said.
“I would prefer annual guidance, and to get away from quarterly,” said Davis, who is UPS’s first CEO to have spent part of his career outside the company. He previously worked at accounting firm Arthur Andersen
LLP and was CEO of an Oregon technology company called II Morrow that
UPS acquired in 1986.
Davis said UPS is going to stay “fairly conservative on stock buybacks” to build cash and create flexibility for acquisitions. The company slowed share repurchases because of the recession, completing $3.8 billion of a $10 billion buyback plan approved in January 2008 during Davis’s first month as CEO.
Earnings excluding one-time items will drop 38 percent this year to $2.17 a share, the average of 20 analysts’ estimates compiled by Bloomberg. UPS said it had $2.8 billion in cash and short-term investments at the end of September.
“No one knows if this is sustainable yet, this recovery,” Davis said. “If you hit a bump along the road, the economy could slow drastically.”
The shares have fallen less than 1 percent this year, lagging behind the 20 percent increase for FedEx Corp. and an 18 percent gain for the Standard & Poor’s 500 Index.
“We’re strengthening ourselves in emerging markets, the Middle East, Asia, areas where we think we can invest and grow,” Davis said.
Supply-chain services help companies order inventory and parts, and move finished goods to their customers more efficiently. Businesses use freight forwarders when sending heavier items across long distances or borders, or to ease transfers among trucks, trains, ships and planes.
UPS’s supply-chain and freight-forwarding operations are its smallest business, accounting for 17 percent of 2008 sales. The rest of the Atlanta-based company’s revenue came from domestic and international package shipments.
“There are lots of freight forwarders and logistics companies overseas, it’s very fragmented,” said David Campbell, a Thompson Davis & Co. analyst in Richmond, Virginia, who recommends buying UPS shares.
“UPS is probably getting to the point where they feel they should be
more aggressive in snapping some of these up.”
UPS also wants to expand its services for handling health- care products, Davis said.
The company built new facilities in the Netherlands and Puerto Rico to handle temperature-sensitive medicines and drugs that need special security. UPS has more than 3.5 million square feet (325,160 square meters) of space dedicated to health-care customers such as Merck & Co.
Valuations for acquisition targets have declined as business owners “become more realistic,” Chief Financial Officer Kurt Kuehn said. Inflated prices and the recession are among the reasons “we haven’t done any big home-run acquisitions” in recent years, he said.
UPS’s largest recent deal was the 2005 purchase of Overnite Corp. for $1.25 billion in cash to expand its freight unit. Overnite is a so-called less-than-truckload carrier, hauling goods from more than one customer in the same trailer.
That’s not an area where UPS is looking for more acquisitions, said Davis, who was at the New York Stock Exchange to mark the 10th anniversary of the company’s initial public offering.
“We’re happy with the network we’ve got,” he said.
Davis also disclosed that UPS holds an 80 percent stake in a joint venture unveiled earlier this year for package shipments in 20 countries including Iraq and Egypt. The transaction included buying Turkey’s Unsped package-delivery firm, whose executives will oversee the venture.
UPS is considering whether to resume giving earnings forecasts on a full-year basis, Davis said. The company switched to quarterly outlooks in 2009 because of the recession, he said.
“I would prefer annual guidance, and to get away from quarterly,” said Davis, who is UPS’s first CEO to have spent part of his career outside the company. He previously worked at accounting firm Arthur Andersen
LLP and was CEO of an Oregon technology company called II Morrow that
UPS acquired in 1986.
Davis said UPS is going to stay “fairly conservative on stock buybacks” to build cash and create flexibility for acquisitions. The company slowed share repurchases because of the recession, completing $3.8 billion of a $10 billion buyback plan approved in January 2008 during Davis’s first month as CEO.
Earnings excluding one-time items will drop 38 percent this year to $2.17 a share, the average of 20 analysts’ estimates compiled by Bloomberg. UPS said it had $2.8 billion in cash and short-term investments at the end of September.
“No one knows if this is sustainable yet, this recovery,” Davis said. “If you hit a bump along the road, the economy could slow drastically.”
The shares have fallen less than 1 percent this year, lagging behind the 20 percent increase for FedEx Corp. and an 18 percent gain for the Standard & Poor’s 500 Index.