Conservative · Stocks to Consider and Updates

UPS Posts Strong Results; Reaffirms Guidance

The world’s largest package delivery provider United Parcel Service Inc. (NYSE: UPS – $115.88) reported quarterly second quarter profit that topped Wall Street estimates as booming online shopping boosted package volumes in the United States, the company’s biggest market. Revenue at the company’s U.S. package services rose 6.3% in the period from a year earlier, while revenue at its International segment jumped 13.6%. The U.S. Domestic segment experienced strong revenue growth driven by e-commerce demand and increased revenue per piece over the prior year, but profits were hurt by planned increases in pension expense and costs for ongoing network projects. The Supply Chain and Freight segment delivered another quarter of double-digit growth in revenue and adjusted operating profit. Atlanta-based UPS said net income rose 7.3% to $1.49 billion. On an adjusted basis, the company earned $1.94 per share, beating analysts’ estimates by a penny and well above last year’s $1.58. Year-to-date cash from operations was $7.2 billion. Free cash flow surged to $4.4 billion in the first half of the year, driven primarily by transformation initiatives that improved working capital and the company raised its full-year target to $5 billion.

       UPS, seen as an indicator of U.S. economic strength and consumer demand, reaffirmed its full-year adjusted earnings forecast of $7.03 to $7.37 per share, in range of the consensus mid-point of $7.25. The good quality shares can remain a candidate for conservative accounts, and the 3.24% dividend yield sweetens the pot.

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