Here's Why Investors Should Hold on to UPS Stock for Now - Zacks
United Parcel Service, Inc. has been benefiting immensely from the new tax law. This is quite evident from the company’s bottom-line growth owing to significant reduction in corporate tax rate. In first-quarter 2018, the bottom line soared 17.4% for the same reason. Results were also aided by strong performances by the International, and the Supply Chain and Freight segments. In fact, the effective tax rate in the quarter was just a little over 19% compared with 31.8% in the prior-year quarter. Effective tax rate is projected between 23% and 24% for the remaining quarters of 2018.
The reduced corporate tax rate also boosts cash flow. In the first quarter, free cash flow totaled approximately $2.6 billion. Notably, with increased cash flow companies have more cash available to fund share repurchases among other things. In February, UPS raised its quarterly cash dividend by 10%. Furthermore, it paid approximately $840 million as dividend to shareholders in the first quarter, reflecting an increase of 10% year over year. Simultaneously, the company bought back 2.2 million shares for more than $250 million.
United Parcel Service, Inc. has been benefiting immensely from the new tax law. This is quite evident from the company’s bottom-line growth owing to significant reduction in corporate tax rate. In first-quarter 2018, the bottom line soared 17.4% for the same reason. Results were also aided by strong performances by the International, and the Supply Chain and Freight segments. In fact, the effective tax rate in the quarter was just a little over 19% compared with 31.8% in the prior-year quarter. Effective tax rate is projected between 23% and 24% for the remaining quarters of 2018.
The reduced corporate tax rate also boosts cash flow. In the first quarter, free cash flow totaled approximately $2.6 billion. Notably, with increased cash flow companies have more cash available to fund share repurchases among other things. In February, UPS raised its quarterly cash dividend by 10%. Furthermore, it paid approximately $840 million as dividend to shareholders in the first quarter, reflecting an increase of 10% year over year. Simultaneously, the company bought back 2.2 million shares for more than $250 million.
