UPS updates financial outlook, objectives through 2019

Meanwhile, the parcel giant and third-party logistics provider also announced plans to offer Saturday delivery options in large metropolitan areas in the U.S., and has began testing a residential drone delivery system.    Parcel giant and third-party logistics provider UPS Inc. gave shareholders an update on its long-term financial outlook and targets through 2019 during the company’s investor conference in New York City.
   At the conference, UPS Chief Financial Officer Richard Peretz said the company expects revenue growth of 4 percent to 6 percent and earnings per share (EPS) growth of 5 percent to 10 percent for the period. UPS is also projecting annual share buybacks of $1.0 billion to $1.8 billion and plans for capital investments of 6 percent to 7 percent of revenue annually. 
   “The strong financial hallmarks of UPS remain unchanged,” said Peretz. “We are great stewards of capital, generate strong cash from operations and have a generous shareowner distribution policy.
   “We continue to deliver the highest operating margins in the industry,” he added. “This legacy combined with our future growth prospects makes UPS a high-quality investment today, and for years to come as we build the smart logistics network.”
   In an effort to reach those financial goals, UPS officials said the company plans to accelerate investment in its next-generation “Smart Logistics Network,” leverage the capital efficiency of its global business model, capture market growth for online business-to-business and business-to-consumer customers, invest aggressively in automation to drive improved performance, and
expand its capabilities in developed and emerging markets.
   The company also announced plans to offer Saturday pickup and delivery options for ground shipments in large U.S. metropolitan areas.
   “Over the next several years, you will see the most sweeping transformation of our network in its history,” said UPS Chairman and CEO David Abney. “We are adding more flexible capacity, more technology, more capabilities and becoming more efficient, ultimately to improve customer and shareowner value.”
   Meanwhile, UPS has partnered with unmanned aircraft maker Workhorse Group to begin testing a residential drone delivery system.
   The company said in a separate statement earlier this week it has successfully tested a drone that launches from the top of a UPS package car, autonomously delivers a package and returns to the vehicle, all while the delivery driver continues along the route to make a separate delivery.
   The test, which took place in Lithia, Fla., utilized Workhorse Group’s HorseFly UAV Delivery system, a high-efficiency, octocopter drone that is fully integrated with Workhorse’s electric and hybrid delivery trucks. The drone docks on the roof of the delivery truck and lowers a cage through a hatch into the truck, at which point the UPS driver inside loads a package into the cage and presses a button on a touch screen, sending the drone on a preset autonomous route to an address. The battery-powered HorseFly drone has a 30-minute flight time, can carry a package weighing up to 10 pounds and recharges while docked.
   Workhorse preset the route for the drone for the test. UPS said in the future, routes could be determined by the company’s proprietary routing software, On-Road Integrated Optimization and Navigation (ORION).
   UPS posted a 360-degree video of the test flight on it’s YouTube page.
   The use of truck-launched drones, especially in hard-to-reach rural areas, could save UPS millions in driver pay and fuel costs, according to the company.
   “Drivers are the face of our company, and that won’t change,” Mark Wallace, UPS senior vice president of global engineering and sustainability, said in a statement. “What’s exciting is the potential for drones to aid drivers at various points along their routes, helping them save time and deliver on increasing customer service needs that stem from the growth of e-commerce.
   “This test is different than anything we’ve done with drones so far. It has implications for future deliveries, especially in rural locations where our package cars often have to travel miles to make a single delivery,” added Wallace. “Imagine a triangular delivery route where the stops are miles apart by road. Sending a drone from a package car to make just one of those deliveries can reduce costly miles driven. This is a big step toward bolstering efficiency in our network and reducing our emissions at the same time.”
   UPS in recent years has been developing and testing a range of automated and robotics technologies, including drones. The company partnered with drone manufacturer CyPhy Works last September to test the use of drones for urgent parcel delivery in remote or difficult-to-reach locations with a mock delivery of medicine from Beverly, Mass. to Children’s Island, about three miles off the Atlantic coast.
   In addition, UPS has been partnering with humanitarian relief organizations to use drones to deliver blood and vaccines to hard-to-reach locations in Rwanda.
   The company was one of 35 stakeholders selected last year to serve on the U.S. Federal Aviation Administration’s (FAA) drone advisory committee, which aims to provide the FAA with recommendations on issues related to the safe integration of drones into the National Air Space System.