UPS Permanently Retires MD-11 Fleet, Takes $137 Million Charge
Written by Emily J. Thompson, Senior Investment Analyst
Source: Yahoo Finance
- Fleet Retirement Decision: UPS has opted to permanently retire its fleet of 27 MD-11 aircraft, incurring a $137 million after-tax charge, reflecting the company's prioritization of safety and operational efficiency despite regulatory clearance to fly again.
- Replacement with New Models: The company plans to replace the MD-11s with more efficient Boeing 767-300 freighters, expecting to take delivery of 18 new aircraft over the next 15 months, with 15 expected this year, thereby enhancing flexibility and profitability in its global network.
- Capacity Loss Mitigation: To compensate for the loss of MD-11 capacity during the fourth-quarter peak season, UPS repositioned aircraft from other regions, increased truck shipments, and leased planes from partner airlines, demonstrating its agility in meeting market demand.
- Impact of Additional Expenses: UPS incurred $50 million in extra costs for operating aircraft from other airlines during the second half of the fourth quarter and anticipates spending $100 million on outsourced capacity this year, which will affect the company's overall cost structure.
Analyst Views on UPS
Wall Street analysts forecast UPS stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for UPS is 107.06 USD with a low forecast of 80.00 USD and a high forecast of 126.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
19 Analyst Rating
9 Buy
9 Hold
1 Sell
Moderate Buy
Current: 106.970
Low
80.00
Averages
107.06
High
126.00
Current: 106.970
Low
80.00
Averages
107.06
High
126.00
About UPS
United Parcel Service, Inc. provides a range of integrated logistics solutions for customers in more than 200 countries and territories. Its U.S. Domestic Package segment offers a range of United States domestic air and ground package transportation services. Its air portfolio offers time-definite, same-day, next-day, two-day and three-day delivery alternatives as well as air cargo services. Its ground network enables customers to ship using its day-definite ground service. UPS SurePost provides residential ground service for customers with non-urgent, lightweight residential shipments. Its International Package segment consists of small package operations in Europe, Indian sub-continent, Middle East and Africa, Canada and Latin America and Asia. It offers a selection of guaranteed day- and time-definite international shipping services. Its supply chain solutions consist of forwarding, logistics, customized third-party logistics and specialized cold chain transportation solutions.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
