UPS’s executive team and board of directors rang the morning bell at the New York Stock Exchange Friday, paying homage to 10 years of UPS stock on the public market.
Chief Executive Scott Davis said it’s been a “volatile 10 years” since the company went public in what at the time was the biggest domestic initial public offering.
But he said having publicly traded stock hasn’t changed the 102-year-old company’s determination to manage for the long term, despite increased scrutiny from outside shareholders and Wall Street analysts eyeing each quarter’s results.
Even before the IPO, he said, inside shareholders put pressure on executives as the company lost money on international expansion in the early 1990s.
“In the international package industry, the first year we ever made a profit was when we went public,” Davis said. “Last year, it made $1.6 billion.”
Despite recent weakness in volume and reduced profits, Sandy Springs-based UPS is spending more than $1 billion to expand its air hub in Louisville, Ky. The company also is buying new planes, building warehouses in Puerto Rico and The Netherlands and investing heavily in hubs in China.
These outlays come as “premium” air service has dipped in favor of cheaper ground deliveries, giving UPS more air capacity than it needs.
Kim Caughey, senior equity analyst at Fort Pitt Capital Group in Pittsburgh, said it’s good UPS has the confidence to make the investments. She thinks they show it isn’t “overreacting” to a wider investor base.
“They are not at all apologetic for making those big investments because they know that’s what will move them into the future,” she said. Fort Pitt Capital Group clients own about 42,000 shares of UPS stock.
Only 10 percent of UPS shares went public in the IPO, with much of the rest remaining in the hands of the management cadre.
Chief Financial Officer Kurt Kuehn noted that the company has slowly increased its outside ownership to 70 percent today. He said more outsiders were able to buy stock as UPS retirees and charitable foundations sold shares to diversify their holdings.
Davis said management is given incentives to hold onto UPS stock long term, which is intended to prevent pursuit of short-term gain alone.
Shares went public at $50 and jumped about 30 percent to $67.25 on the first day of trading. The stock hit its peak in 2007, trading near $75. This year shares plunged to under $40. The stock closed Friday at $54.86. There have been no splits.
Davis said it is a priority to improve stock price. He pointed out UPS has paid $12.21 per share in dividends since going public and has outperformed the S&P 500, calling that index the “best proxy” for comparing the stock.
He said future growth will come from domestic volumes increasing, larger profits in the international package division, and the supply chain and freight divisions gaining steam.
Caughey said she’d give UPS a “B-plus” in how the company relates to Wall Street investors.
“They have done a great job at understanding that we also use them as an economic indicator. But they had a learning curve on that. Now it is in their institutional memory.”
About the Author
Keep Reading
The Latest
Featured
