Where to Invest in 2011 - Wall Street Journal
United Parcel Service
With about 6 percent of the country's gross domestic product delivered by United Parcel Service, the Atlanta-based company is often seen as a proxy for the U.S. economy. But it looks like the folks with the dark brown trucks are a step ahead: While the economy has been sluggish, all the shipping company's divisions, encompassing areas such as international package delivery and logistical operations, are on track to post profit increases of more than 50 percent from year-ago lows.
The snapback in global trade is one reason for the gains. But UPS has also restructured its U.S. business and invested in its hubs to make them more autonomous, lowering labor and other costs. Those investments should pay off even further as the economic recovery boosts volume, says Kevin Sterling, BB&T Capital Markets transportation analyst. On average, analysts expect profits to increase 18 percent, to $4.1 billion in 2011. Some analysts expect the company to put its $4 billion in cash toward acquisitions to gain more market share abroad, boost its share buyback and even increase the dividend it has paid since 1955. Chief Financial Officer Kurt Kuehn tells SmartMoney that the most likely type of acquisition would push UPS further into new areas like developing markets or into industries where it could use more expertise.
To be sure, any slowdown in the global economy or protectionist moves made by the U.S. or other countries could hurt business, and UPS's stock has already risen 20 percent since the summer. But at 16 times expected 2011 earnings, it still trades below its long-term average.
United Parcel Service
With about 6 percent of the country's gross domestic product delivered by United Parcel Service, the Atlanta-based company is often seen as a proxy for the U.S. economy. But it looks like the folks with the dark brown trucks are a step ahead: While the economy has been sluggish, all the shipping company's divisions, encompassing areas such as international package delivery and logistical operations, are on track to post profit increases of more than 50 percent from year-ago lows.
The snapback in global trade is one reason for the gains. But UPS has also restructured its U.S. business and invested in its hubs to make them more autonomous, lowering labor and other costs. Those investments should pay off even further as the economic recovery boosts volume, says Kevin Sterling, BB&T Capital Markets transportation analyst. On average, analysts expect profits to increase 18 percent, to $4.1 billion in 2011. Some analysts expect the company to put its $4 billion in cash toward acquisitions to gain more market share abroad, boost its share buyback and even increase the dividend it has paid since 1955. Chief Financial Officer Kurt Kuehn tells SmartMoney that the most likely type of acquisition would push UPS further into new areas like developing markets or into industries where it could use more expertise.
To be sure, any slowdown in the global economy or protectionist moves made by the U.S. or other countries could hurt business, and UPS's stock has already risen 20 percent since the summer. But at 16 times expected 2011 earnings, it still trades below its long-term average.
