United Parcel Services (UPS), the world's largest package delivery company, has expanded its cargo capacity by more than 50% in Latin America.
Encouraged by an improving economy and growing demand for cargo services in Latin America, the company has enhanced its capacity by deploying Boeing 767, substituting Boeing 757 on 19 weekly flights to the region and carry 50% additional load.
The flights will cover UPS' networks between Miami and Quito and Guayaquil, Ecuador; Bogota, Colombia; Panama City, Panama; Guatemala City, Guatemala, and Managua, Nicaragua.
United Parcel is undergoing a series of initiatives to perk up its earnings over the next several years. Key among these is renewed focus on yield improvement in the U.S. Domestic Package division. Increased export volumes, improved domestic pricing, operating leverage benefits on 35–40% capacity expansion at Worldport and the flexible Teamster contract should also prove earnings accretive.
Going forward, United Parcel is expected to benefit from firming industrial production trends and Less-Than-Truckload (LTL) industry pricing discipline. Further, the company continues to expand in emerging markets. Over the long term, United Parcel’s primary focus will remain on health care end markets, which could be a larger contributor to growth in the future.
We expect improving underlying fundamentals in theparcel industry on a gradual recovery in U.S. economic conditions. Moreover, continued investments in technology and network enhancements as well as an integrated sales approach given its industry-leading margins and financial strength bode well for future growth.
The company competes in highly competitive markets. It faces significant competition on local, regional, national and international fronts. One of its key competitors is FedEx Corporation (FDX). Other competitors include postal services of the U.S. and other nations, various motor carriers, freight forwarders and air couriers. Further, rising fuel prices and high unionization keep us cautious on the stock.
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