Steady Free Cash Flow Generator: United Parcel Service

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Significant premium in book value multiples

United Parcel Service or UPS, $92 billion package delivery company, reported 8.2% rise in revenue and 43% rise in profits. According to its press release, the figures exclude the after-tax impact of the adjustments.

“We achieved our 2017 adjusted earnings-per-share target through exceptionally strong revenue and yield growth, coupled with benefits from our network investments and portfolio initiatives.

“We made significant progress on key capacity investments in 2017. Our momentum, transformative actions and the economic catalyst from the Tax Cuts and Jobs Act (TCJA), position UPS for growth in 2018 and beyond. We expect to unlock significant resources, which will be available for accelerated investments in our network and create additional opportunities for our people.”

David Abney, UPS chairman and CEO

Meanwhile, UPS had $20.3 billion (+$8 billion year over year) in long-term debt and $1 billion in shareowner’s equity (+$601 million year over year). In 2017, UPS also raised $3.3 billion in financing activities.

In the past three fiscal years excluding 2017, UPS allocated $10 billion in financing activities and accumulated a healthy $12 billion free cash flow.

Analysts have an average price target of $127.86/share (vs. $106.99 at the time of writing). This blog’s conservative valuation indicated a per share figure of $32.82.

Disclosure: No shares in UPS.

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