UPS Earnings: Investors, We Have an Amazon Problem | Barron’s

Keith Schoonmaker, director of industrial equities research at Morningstar, said he wasn’t surprised at the higher capex forecast since meeting surging online demand doesn’t come for free. In an email to Barron’s he said: “Even though UPS has tremendous capabilities, it didn’t have idle sorting facilities waiting for fantastic growth, and must expand to capture its share of the growing market. This demands more and larger facilities, and investment in automation to preserve profitability in a segment challenged by fewer packages per stop and greater proportion of missed deliveries, compared to historical business- to business- parcel deliveries. Some tax relief and accelerated depreciation likely pull forward capital spending for many industrial firms, including the integrated shippers.”

United Parcel Service said it would continue to monitor pricing to compensate for higher costs. It may take some time, possibly the next holiday season, to gauge whether UPS’ increased investments and pricing strategy pays off. For now, it seems some investors aren’t waiting around for that delivery.

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UPS Earnings: Investors, We Have an Amazon Problem – Barron’s.

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