UPS has told shareholders that the money it’s spending now to bolster its abilities to service e-commerce demand will pay off toward the end of the year. Patience is critical to any investment approach, and getting caught up in the ups and downs of quarterly earnings hits and misses is a fool’s game. Paul Ziobro and Joshua Jamerson write that UPS investors are in wait-and-see mode today.
United Parcel Service Inc. UPS 1.12% insists that money spent today to accommodate U.S. e-commerce growth will eventually pay off with better margins later this year.
For now, investors are waiting to see if those promises come true. The parcel-delivery company posted a 2.1% decline in operating profit in the first quarter, including a 2.4% decline in its domestic business.
The U.S. business is bearing the brunt of spending, with construction under way for two major automated hubs in Salt Lake City and Dallas, plus the addition of delivery and pickup services on Saturday. The company is raising rates on shippers and adding new surcharges, too, but not enough to offset the extra costs to help facilitate more consumers shopping online. UPS says shipments to homes, a proxy for e-commerce deliveries, rose about 7% in the first quarter, ahead of the 2.6% volume increase in its U.S. parcel business.
“We’re stepping up the pace of investments now to enable UPS to better participate in the vast opportunities we see ahead,” Chief Executive David Abney said on Thursday’s earnings call.
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Here’s a video on UPS’s new offerings for small e-commerce businesses. UPS is targeting small “e-tailers” who rely on door to door shipping to get their products to customers.