UPS (NYSE:UPS) is keenly focused on growing its international business especially in China. UPS is the largest package delivery company globally as well as a leader in the U.S. trucking industry for small packages and global supply chain management. Its main competitors are FedEx Corp. (NYSE:FDX) and national postal services such as the United States Postal Service (USPS).
We currently have a Trefis price estimate of near $83.60 for UPS’s stock, which is about 25% ahead of the current market price.
International Markets Support Growth
The international package delivery market has been growing at a faster rate than the domestic market with Asia offering significant opportunities for the long-term growth of UPS. The growth in Asia is being driven by global demand, which is stimulating improved demographic and economic trends throughout the region, particularly in China. UPS has steadily increased air services between the U.S. and Asia over the last few years, including greater connectivity to Japan and South Korea in 2011. In 2010, UPS established new strategic relationships with local partners in key emerging Asian markets like Vietnam, Malaysia, and Indonesia to expand its global coverage network.
UPS Most Connected to China
In 2010, UPS began operating its new Intra-Asia air hub in Shenzhen, China, to better serve its customers by reducing transit-time in the region. It links all of China via Shanghai to UPS’s international network with direct service to the Americas, Europe and Asia.
By continuing the expansion of its Asian air network, UPS has recently launched a new flight to serve western China. The flight originates in Cologne, Germany, and makes a stop in Warsaw before transiting to Chengdu, in western China, on the way to Shanghai. With the addition of the Chengdu flight, UPS now connects Europe and Asia with 24 flights per week, providing more next day options than any logistics carrier.
In 2010, UPS submitted an application for a domestic service license in China and expects to receive approval in 2011 which is the next logical step in UPS’s strategy for expansion in the Chinese marketplace.