UPS names Operating Chief David Abney as its new CEO

Reuters With CNBC
Changing of guard at UPS

The incoming head of United Parcel Service said on Friday the world's largest parcel delivery company will continue investing to build capacity in emerging markets and to expand its services, especially in healthcare, its fastest-growing segment after e-commerce.

Chief Operating Officer David Abney, 58, named on Friday to succeed Chief Executive Scott Davis on Sept. 1, also said the company would make acquisitions to build its capabilities overseas, and didn't rule out large deals.

Expansion in emerging markets is "our number one priority," Abney said in a telephone interview.

Trade among emerging markets is growing rapidly and UPS expects that eventually 95 percent of consumers will be outside the United States.

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"We're going to continue to focus on making those (emerging market) investments," Abney said. "Growing internationally and diversifying our customer base are extremely important to us."

Davis and Abney said Davis's retirement and succession planning had been in the works for several years, signaling no abrupt strategy changes for the Atlanta-based company, which reported $55.4 billion in revenue last year.

Even as it builds international capacity, especially in Asia and Latin America, the company's international package revenue has remained steady at just over $12 billion since 2011. Capital expenditures were about $2 billion last year.

Rising demand for drugs and medical devices will create a large revenue opportunity for UPS, the executives said, as aging populations and rising income fuel demand for home delivery of healthcare products.

Pharmacists at UPS's hub in Louisville, Kentucky, for example, fill orders for pharmaceutical companies, medical device makers and wholesalers.

"We're in the early innings on healthcare," said Davis.

Among other initiatives, UPS is investing in non-diesel trucks and is working to reduce driving. All new tractor-trailers purchased this year, for example, will run on liquefied natural gas. UPS also has invested in propane-fueled vehicles.

Shake-up in UPS c-suite

The company is not shopping for aircraft, having renewed its fleet over the past few years, Abney said. As COO, Abney has been running the company's global transportation network and has led its investment in alternative fuel fleets.

Davis, who has been CEO and chairman since 2008, will retire after about 28 years with UPS.

UPS shares were trading at $103.61 on the New York Stock Exchange at midday on Friday, down a penny from Thursday's close. (Click here for the latest quote.) They have gained about 22 percent in the past year, compared with a 20 percent rise in the S&P 500 index.

"To promote from within somebody who's been battle-tested through many different kinds of key responsiblities, it's great," management expert Jeffrey Sonnenfeld told CNBC Friday. "We just don't have the boardroom battles and the dramas."

There were several internal candidates up for the job, but none of them will leave afterwards, Sonnenfeld added, "unlike any other company you can think of."

"There was general consensus on who should win" the job, he added in a "Squawk Box" interview.

Sonnenfeld, a senior associate dean at the Yale School of Management, said chief executives at UPS typically serve for five to six years.

By Reuters. CNBC contributed to this report.