Investors eyeing UTI as a stock that could carry some freight.

GLOBAL logistics firm UTI Worldwide Inc. operates in an unsexy, highly fragmented and little-understood industry: freight forwarding and contract logistics.

But Wall Street investors have taken notice. Shares of UTI Worldwide have surged 56 percent in the past year, hitting an all-time high of $54.50 last week, despite a generally weak global economy, particularly in Europe. (As of July 22, shares stood at $52.68.)

Mark Davis, a senior analyst at Midwest Research, believes that UTI shares will hit $62 within 12 to 18 months. UTI Worldwide is a long-term play in the global logistics industry, which is undergoing a revolution of sorts.

"Most people have no idea what a freight-forwarder or logistics provider is," said Davis. "It's not just about warehousing and shipping. It's about taking over and managing the entire supply chain for global manufacturers."

UTI boasts an impressive client roster in the chemical, apparel, pharmaceutical and automotive industries, including DuPont, BASF Group, Liz Claiborne Inc., Sara Lee Corp., Abbott Laboratories, Bristol-Myers Squibb Co., DaimlerChrysler AG and General Motors Corp.

These and other manufacturers are outsourcing a growing amount of non-core services. This business, called contract logistics, creates opportunities for UTI to offer higher-margin services and capture market share. Computer and appliance makers, for example, often need "pick and pack" services in which instructions or additional parts are added to a product before shipping. UTI already has a contract with wireless provider Vodaphone under which it not only ships but also repairs broken mobile phones in Europe.

"Our idea is to solve more problems and challenges in the supply chain by adding new capabilities," said Roger MacFarlane, chief executive of UTI, which is based jointly in Rancho Dominguez and the British Virgin Islands, and has 11,500 employees and offices in 269 cities worldwide.

UTI Worldwide does not own any warehouses, steamships of airlines. Rather, it operates like a tour operator, only for cargo--buying transportation contracts in bulk and shipping en masse, using airlines and ocean liners.

The tight-knit South African management team of MacFarlane, Vice Chairman Matthys "Tiger" Wessels and Peter Thorrington, president and chief operating officer, worked together for five years at Bax Global Inc. of Irvine. In 1993, they left Bax and teamed up with Alan Draper, currently executive vice president and head of the company's Asia Pacific region. They acquired three freight forwarders in Germany, Britain and South Africa to create the platform for what would become UTI.

The company raised $70 million in a 2000 initial public offering and completed a $100 million secondary offering last year.

Management cashed out $23 million in the secondary offering but still holds 30 percent of shares outstanding.

UTI has reported four consecutive quarters of strong double-digit earnings increases. In the first quarter ended April 30, UTI's net income rose 60 percent to $12.8 million from $8 million in the like year-ago period.

The company first expanded its presence in contract logistics in 2002 with the purchase of privately held Standard Corp., of Columbia, S.C.

In December, UTI bought a South African firm, International Healthcare Distributors, from a group of 11 multinational pharmaceutical companies for $40 million.

1HD controls 35 percent of drug distribution in South Africa and has an Internet ordering system that orders online.

UTI's growth depends largely on the growth of international trade--and the absence of any major disruptions that could be caused by a terrorist attack, for example.

"Anything that hinders economic growth and international trade such as recessions, trade restrictions, geopolitical issues, war, and significant currency fluctuations, could negatively affect the company's operating results," said Jon Langenfeld, an analyst with Robert W. Baird & Co.

In addition, global transportation markets are highly dominated by a handful of much larger players.

"Still, we consider UTI Worldwide a compelling long-term investment," Langenfeld said.

UTI Worldwide Inc.

Stock Prices

YEAR (Jan. 31)                  2004      2003

Revenue (millions)             $596.1   $404.8
Total Expenses (millions)       537.1    359.3
Operating Income (millions)      59.1     45.4
Net Income (millions)            44.8     29.3
Earnings Per Share              $1.42    $1.11

SUMMARY

Business: Global logistics and freight forwarding

Headquarters: Rancho Dominguez; Brit. Virgin Isl.

CEO: Roger I. MacFarlane

Market Cap: $1.62 billion   Dividend Yield: 0.2%

Total Liabilities: $347.7 million   P/E Ratio: 33.7

Long-Term Debt: $7.5 million

Staff reporter Kate Berry can be reached at [phone], ext. 228, or at [e-mail].