United Parcel Service Inc. (UPS) aims at expanding its presence in China by setting up a domestic service in the country.
 
With international operations accounting for around 22% of total revenue in fiscal year 2009, the company wishes to tap the growing consumer and business demand in China. The company sees billion-dollar opportunities existing in the Chinese market.  United Parcel’s business could be as large as 5 million packages a day compared with approximately 1.2 million daily packages in the international domestic segment in 2009.
 
Soon, United Parcel will be submitting an application to the State Post Bureau, the local regulator for a domestic license in the country. Once granted the approval, the company plans to offer next-day delivery service and second and third-day delivery products domestically.
 
Based in Atlanta, United Parcel Service is the world’s largest express carrier and package delivery company providing specialized transportation and logistics services in the United States and the world over. Globally, United Parcel transports approximately 1.8 million packages each business day to 6.1 million consignees in over 200 countries and territories.
 
The company delivered encouraging results in the second quarter of 2010 with earnings per share at 84 cents, above the Zacks Consensus Estimate of 77 cents. Top line increased 13% over the year-ago quarter. US Domestic Package revenue climbed 7.1% year over year, International revenue by 23% and Supply Chain & Freight revenue by 20.6%.
 
Anticipating growth in higher ground and export volumes, United Parcel increased its 2010 earnings guidance to $3.35 – $3.45, from its prior expectation of $3.05 $3.30 per share. The revised guidance represents a 45% to 50% year-over-year growth.
 
We currently maintain a Neutral recommendation on the stock, as a highly competitive market with its unionized labor force, large international presence, and concerns over Eurozone debt crisis would very likely restrict growth.

 
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