A Look at United Parcel Service’s Strong Financial Standing




United Parcel Service (UPS) has been able to grow its revenues steadily over the past few years. Revenues have grown from $49.5 billion in 2010 to $58.2 billion in 2014, having a four-year CAGR (compounded average growth rate) of 4.12%. The company has a wide scale of operations and strong operational efficiency. It continues to strive for higher goals.

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Operating income and margins

UPS’s adjusted operating income has also grown. It rose from $5.7 billion in 2010 to $7.1 billion in 2014, thus clocking a four-year CAGR of 5.66%. The company has also been able to maintain operating margins that are the best in the industry. Adjusted operating margins have risen from 11.5% in 2010 to 12.2% in 2014.

Return on assets

UPS’s return on assets (or ROA) have also shown continuous improvement, rising from 10.7% in 2010 to 12.2% in 2014.

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Return on invested capital

UPS has successfully generated a high return on invested capital (or ROIC). It rose from 21.2% in 2010 to 27.2% in 2014. UPS has been able to beat its cost of capital by huge margins, and thus it has been able to create high value.

In the future, since the need for capital expenses will go down, the company might be able to generate better free cash flow margins, making UPS a lucrative option for investors.

Strong operating cash flows

UPS generates strong operating cash flows, which is evident from its cash flow per share at around $5.60 per share. The company uses these efficiently to make share repurchases, pay dividends, and invest in expansions.

UPS forms 2.8% of the Vanguard Industrials ETF (VIS). Rival FedEx (FDX) forms 1.76%, while other logistic providers like C.H. Robinson Worldwide (CHRW) and Expeditors International (EXPD) form 0.42% and 0.37%, respectively.


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