Pat McKeough responds to many requests for advice on stock market investments and other questions on investment and the economy from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle. This week, we heard from an Inner Circle member who was interested in one of the best known courier companies, UPS. Pat looks at the company’s strategy of growth by acquisition which suffered a recent setback. And while UPS still does the greater part of its business in the U.S., he also looks at the effect of a slowdown in international markets on the company’s results. Q: Pat: Could you give me your recommendation on UPS? Thanks. A: United Parcel Service (symbol UPS on New York; www.ups.com) is the world’s largest air and ground courier. The Atlanta-based company also provides specialized transportation and logistics services. UPS operates throughout the U.S. and in over 220 other countries and territories. However, the U.S. supplies 75% of its revenue. The company has a long history of growing by acquisition. However, it had to abandon its recent $6.8-billion purchase of TNT Express, one of the largest European couriers, because competition regulators blocked the deal. As a result, UPS had to pay a $268-million break fee. In the three months ended March 31, 2013, UPS’s revenue rose 2.3%, to $13.4 billion from $13.1 billion a year earlier. The company saw increased shipments in the U.S., particularly as more consumers made online purchases. It also raised its rates. [ofie_ad]
UPS aims to acquire pharmaceutical shipping firm in Hungary
Excluding one-time items, earnings rose 3.2%, to $1.0 billion from $970 million. UPS spent $1.6 billion buying back its shares in 2012. Due to fewer shares outstanding, earnings per share rose 4.0%, to $1.04 from $1.00. The company’s long-term debt of $11.1 billion is a low 14% of its market cap, and it holds cash of $7.3 billion, or $10.06 a share. That will support the company’s plan to buy back $4.0 billion of its shares in 2013. UPS now plans to buy Hungary-based pharmaceutical shipper Cemelog Zrt for an undisclosed amount. Cemelog has three distribution centres and ships drugs and medical devices to hospitals, pharmacies and wholesalers in Central and Eastern Europe. In the Inner Circle Q&A, Pat looks at whether increased shipments in the U.S. can offset weaker revenues from its international operations. Slower European and Asian economies have caused more companies to use cheaper ocean shippers to move their goods. He concludes with his clear buy-hold-sell advice on the stock. (Note: If you are a current member of the Inner Circle, please click here to view Pat’s recommendation. Be sure to log in first.) COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members UPS depends increasingly on revenues from many different countries. Does this give you confidence that a stock has strength in diversity, with strong revenues in one area offsetting weakness in other places? Or do you think that the wider a company spreads its business, the more things can go wrong? Let us know what you think.
