<<I am still trying to get shares of UPS. >>
Glenn, maybe Mark Fowler can get some for you from Morgan Stanley.<vbg>
Ps
I don't think that Ups will be a double bagger in the first week, which is what I'm getting used of.;-)
<<Business Week: November 15, 1999
News: Analysis & Commentary: Deals
UPS: Will This IPO Deliver?
A peek under the wrappings show it's not a sure bet
Can the guys in brown bring home the green? United Parcel Service Inc.'s plan to float nearly 10% of its shares, perhaps as early as next week, may turn out to be the largest initial public offering ever. Small investors are clamoring to get into a blue chip that could turn out to be a back door Internet play to boot. Public demand for a piece of the familiar UPS brown trucks and gold logo is likely to drive the price well above the offering range of $36 to $42 per share.
Nonetheless, analysts warn that UPS faces challenges that could bring its share price back down to earth, once the IPO glow fades. ``If you chase UPS too early, you could get burned,' says analyst Brian L. Eisenbarth of Collins & Co. The company is vulnerable to rising fuel costs and growing rivalry overseas--where much of its future growth was supposed to come from. And a dispute is brewing with the Teamsters over alleged contract violations.
PROFITABLE. To be sure, UPS is no pushover. It's big: Last year the company earned $1.7 billion on revenues of $24.8 billion. And it's profitable, compared with its peers. At 14.6% so far this year, the UPS operating margin is twice that of FDX Corp., parent of archrival Federal Express Corp. UPS also clocked a 24% return on equity in 1998, vs. 14% for FDX.
The explosion of e-commerce should also give UPS a boost, as shoppers buy on the Web and have the purchases shipped home or to the office. A study by Zona Research Inc. found that UPS shipped some 55% of all items bought on the Internet last Christmas, compared with 32% for the U.S. States Postal Service and 10% for FedEx.
Still, it's not likely that UPS can get the same kind of explosive bottom-line growth that a pure e-commerce play can achieve. After all, to move all those packages, it must add trucks and drivers; Web retailers, on the other hand, incur relatively few additional fixed costs to accommodate higher volumes.
Such concerns lead some potential investors to say the offering may be overpriced at the high end. At $37, UPS would trade at about 20 times the trailing 12 months' earnings--the same level as FDX. At $42, UPS would fetch 23 times earnings, 15% above current FDX levels. ``Based on where UPS is coming out, FedEx looks very cheap,' says Jeff Pittsburg of investment house Pittsburg Institutional.
IN THE DUMPS. Instead of an Internet highflier, think of UPS as a slow-but-steady blue chip. The IPO may indeed soar, but most analysts expect the stock to settle down soon--and face hurdles similar to those that caused investors to dump FDX shares this fall. In September, FDX reported earnings below Wall Street's expectations, blaming lower-than-expected growth and higher fuel costs. Its stock plunged 12% in one day. In its prospectus, UPS notes that it, too, could be hurt by the same sort of cost pressures.
When it comes to labor relations, UPS faces a thornier situation than largely nonunion FedEx. UPS was bruised by a drivers' strike two years ago, and Teamsters leaders have filed a grievance saying the company has not met its obligation under the settlement to add 2,000 full-time jobs annually for the duration of the five-year contract. UPS says it will meet the quota this year but should not have had to in earlier years--because volumes hadn't yet recovered to pre-strike levels.
And even CEO James P. Kelly acknowledges that UPS faces stern tests abroad. The company is in a pre-offering quiet period and declined to comment for this article, but when the stock sale was announced in July, Kelly noted that UPS international operations were under threat from increasingly aggressive postal services. The IPO, said Kelly, was intended to give UPS the currency for acquisitions that would make it more competitive abroad. If he manages to do that--and keep a lid on the potential problems at home--UPS might live up to its hype. If not, UPS may not deliver the goods.>>
<<UNITED PARCEL SERVICE INC
55 Glenlake Parkway NE
Atlanta GA 30328 USA
404-828-6000 Fax: 404-828-6562 Company Website
EDGAR Online Filings
World's largest express carrier, the largest package delivery company and a leading global provider of specialized transportation and logistics services.
CEO: James P. Kelly
CFO: Robert J. Clanin
Filed on: 7/21/99
Ticker: UPS
Price: $47-$49
Status/Tentative Pricing: NOV9-10
SIC 4210
State of Incorporation DE
Employees, Full-time|Part-time 330,000
Fiscal Year-End 12/31
Revenue $24,788.0 Mln (FY 98)
Net Income $1,741 Mln
Lead Underwriter MORGAN STANLEY DEAN WITTER & CO
Est. Offering Amount 5360600000
RECENT NEWS
11/5/99 The company increased its price from $36-$42 to $47-$49.
10/20/99 The company set its price to $36-$42 and set its number of shares to 109,400,000.
7/21/99 The company filed for IPO.>> |
