From The Wall Street Journal pdated Nov. 13, 2014 7:42 p.m. ET United Parcel Service Inc. executives laid out the company’s five-year plan on Thursday, highlighting aggressive cost-cutting measures, as well as ambitious growth targets. The company is targeting earnings-per-share growth of more than 50% over the period to between $7.62 and $9.12 in 2019. It expects profit this year of $4.90 to $5 a share. The century-old delivery giant is setting a high bar for itself. In the past two years, its earnings per share have grown less than 5%. Home delivery of e-commerce purchases has been a drag on its profitability in the U.S. But executives said they expect revenue to rise rapidly—by as much as 7% annually over the period—as the global economy grows and e-commerce continues to increase. The company plans to spend more than $2 billion to expand internationally in Asia, Europe and the Americas, and will also invest in modernizing some operations in the U.S. to automatically sort packages. “Over the next few years, you’ll see a company that’s more adept, more agile and can seize opportunities quicker. We will continue to deliver top- and bottom-line growth,” said Chief Executive David Abney. UPS said that Orion, its proprietary routing software, which aims to shave miles off of drivers’ delivery routes, should save it between $300 million and $400 million annually after it is fully deployed in 2017. The 40% of the company’s 55,000 U.S. routes already using the software have been reduced by an average of between seven and eight miles, the company said. Each mile per driver per day is worth $50 million a year. Orion is one of several projects the company is pursuing to boost the profitability of e-commerce deliveries, which have forced a change in its U.S. business model. Before the online-shopping boom, UPS would drop off several packages at one retailer. Now it spends substantially more to drop packages at homes scattered across neighborhoods, making it less efficient. UPS executives told investors that one way the company is trying to improve its efficiency is through its My Choice app, which allows customers to sign for a package remotely and leave other instructions for a delivery driver. Another program would give retailers better deals if they agreed to coordinate their package shipments to a given household so UPS could deliver them all at once. It is “all about increasing the number of packages per stop,” said Chief Financial Officer Kurt Kuehn. By 2018, e-commerce will account for half of all U.S. packages that UPS delivers, up from more than 44% currently, UPS said. Even adding a tenth of a package per stop would save the company $200 million annually. If retailers agree to coordinate their shipments, UPS could compete more directly with the U.S. Postal Service, which is doing a booming business in low-price deliveries by having its letter carriers take packages from the local post office to the recipient’s doorstep. UPS’s cost per package had been growing by 2.3% annually on average through 2010, but the new initiatives should slow the rate of cost increases, UPS said. The company will continue to spend on expansion and new technology, but expects to generate returns on those investments of at least 25% annually, Mr. Abney added. UPS intends to return $30 billion to shareholders over the next five years, including $15 billion in share repurchases, he said. It plans $2.7 billion of those repurchases next year. Shorter term, the company said it expects operating profits to increase by 9% to 11% next year. It forecast an increase in earnings per share 10% to 15% to between $5.45 and $5.70. Write to Laura Stevens at laura.stevens@wsj
Posted on: Sun, 16 Nov 2014 04:30:11 +0000
Trending Topics
Recently Viewed Topics
© 2015