ATLANTA - United Parcel Service Inc. (NYSE: NYSE:UPS) has announced its intention to acquire Estafeta Mexicana S.A. de C.V., a prominent express delivery company in Mexico, as part of its strategy to expand its logistics and delivery services across North America. This move aligns with the growing significance of Mexico in global trade and the increasing trend of nearshoring.
Carol Tomé, CEO of UPS, highlighted the acquisition as a strategic step to leverage Mexico's manufacturing boom and the shift in global supply chains. The integration of Estafeta into UPS's network is expected to offer customers in Mexico enhanced access to the U.S. market, with improved service efficiency and a comprehensive range of logistics solutions.
The agreement builds on a commercial partnership established in 2020 between the two companies. Estafeta, with a 45-year history in the logistics sector, is set to merge its local expertise with the global reach of UPS. Jens P. Grimm, President and CEO of Estafeta, expressed enthusiasm for the merger, emphasizing the alignment of both companies' values and commitment to service excellence.
The transaction is anticipated to be finalized by the end of 2024, pending regulatory approvals and customary closing conditions. Financial details of the deal have not been disclosed. Further information regarding the acquisition will be provided in UPS's second-quarter investor conference call scheduled for July 23, 2024.
UPS, a global leader in logistics with a revenue of $91.0 billion in 2023, continues to focus on its mission of delivering what matters while fostering a culture of innovation, community engagement, and diversity. Estafeta's integration into UPS's network is seen as a strategic move to strengthen the connection of Mexico's economy with global markets and to provide customers with a unified logistics experience.
In other recent news, United Parcel Service (UPS) has seen several noteworthy developments. UBS has maintained a Buy rating on UPS, setting a price target of $175, despite a slight downward revision of its second-quarter earnings per share (EPS) estimate from $2.00 to $1.95. This change reflects an anticipated $350 million sequential improvement in Domestic Package EBIT from the first to the second quarter, surpassing the typical seasonal uptick by approximately $100 million. The Fit to Serve program was highlighted as a significant factor in driving estimated sequential cost reductions of $200 million for the second quarter.
In a separate development, UPS announced the sale of its Coyote Logistics Truck Brokerage business to RXO for $1.025 billion. The transaction is expected to be completed by the end of the year, with UPS planning to revise its financial outlook following the deal's closure. BMO Capital Markets, Susquehanna, and Oppenheimer have increased their price targets for UPS shares following the release of UPS's first-quarter earnings, which exceeded consensus expectations.
Finally, UPS announced the departure of its Chief Financial Officer, Brian Newman, and has initiated a search for his replacement. Despite these changes, UPS has reaffirmed its full-year financial guidance. These are all recent developments in the company's trajectory.
InvestingPro Insights
As United Parcel Service Inc. (NYSE: UPS) gears up to enhance its North American logistics capabilities through the acquisition of Estafeta Mexicana S.A. de C.V., the company's financial health and market position remain key considerations for investors. With a solid market capitalization of $124.32 billion and a P/E ratio that stands at 21.07, UPS showcases a robust presence in the industry. The company's commitment to shareholder returns is evident, having raised its dividend for 14 consecutive years, and maintaining dividend payments for 26 consecutive years, a testament to its financial stability and consistent performance.
InvestingPro Tips highlight that UPS operates with a moderate level of debt, which is crucial for maintaining financial flexibility, especially during times of strategic expansions like the current acquisition. Additionally, the company is recognized as a prominent player in the Air Freight & Logistics industry, which is directly relevant to the integration of Estafeta's local expertise with UPS's global network. This strategic move is expected to bolster UPS's service offerings and market reach, aligning with the company's growth objectives.
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