UPS Announces Transformation Plan

United Parcel Service (UPS) recently announced their upcoming transformation plan. On September 12, one of its biggest competitors, FedEx, announced their plans to expand services to a six-day delivery week. In addition to that, FedEx revealed plans for expansion. Shortly after this, UPS had an announcement of their own. Attempting to generate additional revenue and the reduction of costs, UPS is moving toward a transformation plan that was presented to investors in New York.

UPS claims that as a result of the additional revenues and reduction of costs, they anticipate their earnings per share to increase. The specific projected incremental increase remains unknown, however they anticipate an additional $1.00-$1.20 by the year 2022. UPS hopes to maintain its strategic initiative to expand in international markets allowing them to offer high-growth potential. During the investor meeting in New York, UPS shared that they anticipate cross-border e-commerce to grow significantly. UPS anticipates growth of 28% in the next three years.

The upcoming peak season is not inhibiting UPS from accomplishing this transformation. They still anticipate a successful holiday season for 2018 and they are working hard to complete 17 projects as a part of the transformation before the holiday season hits. Among the increase in revenue and decrease in costs initiative, UPS announced their plan to focus more on the Healthcare and Life Sciences logistics market.

Similar to FedEx, UPS announced their plans to invest significantly in the upgrade of many of their facilities. The reason for these upgrades are to keep up with the increase in demand and growth in e-commerce business. UPS has projected between $6.5 billion and $7 billion towards the transformation. A large portion of this money will be dedicated to new technology, aircraft, and automated capacity.

Although this announced transformation plan came with great anticipation for the growth to come, some of their investors did not feel the same. The company’s stock declined 2.9% on September 13, bringing it down to $119.70. This decrease could be attributed to a few things, one of which is the company’s goal of savings not meeting the investors’ expectations.

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