UPS posts solid first quarter 2018 gains

First quarter earnings results for Atlanta-based transportation and logistics titan UPS saw solid gains, the company reported earlier today.

Quarterly revenue was up 10% at $17.1 billion, while earnings per share at $1.55 matched Wall Street estimates while posting a 17% annual gain. Net income rose 15% to $1.3 billion.

“Top-line growth in our business was strong across all business segments, reflecting the power of UPS’s global solutions and continued favorable economic conditions,” said UPS Chairman and CEO David Abney. “When combined with our transformation initiatives, these favorable trends position UPS for strong returns going forward.” 

On the company’s earnings call today, Abney said that UPS is advancing its global smart logistics network and bringing online additional network capabilities around the world, including more than 400,000 pieces per hour of highly efficient sort capacity this year. And he added that in the coming weeks, UPS will open new hubs in London and Paris, and this summer, two large regional hubs in Salt Lake City and Atlanta.

“Operating leverage in our business will improve as we significantly expand our capabilities this year and beyond,” he said. “Our superior network and operating strategies are enabling UPS customers to take advantage of free trade around the world. UPS supports fair trade agreements like the modernization of NAFTA and other pacts that will make cross-border trade more predictable and easier for businesses of all sizes.”

Individual segment results for Q1:

• U.S. domestic package revenue increased 7.2% to $10.2 billion, with operating profit off $194 million annually at $756 million. Average daily shipments were up 4.6% to 19.4 million, with Next Day Air up 9.3% at $1.437 billion, Deferred up 4.3% at $1.297 billion, and Ground up 4.1% at $13.545 billion. Revenue per package was up 4.3% at $10.97, with Next Day Air down 1.9% at $19.40, Deferred up 5.7% at $12.88, and Ground up 2.7% at $8.51;
• International Package revenue on an adjusted basis was up 15% at $3.533 billion, with two fewer operating days in several countries, and operating profit for the group up 12.8% at $594 million. Total revenue per international package was up 9.8% at $16.99, with domestic up 17.8% at $6.70, and export up 2.6% at $28.87; and
• Supply Chain and Freight revenue increased 16% to $3.4 billion, with UPS saying that was largely attributed to a focus on high quality, middle market consumers, with Forwarding revenue up 27%, due to revenue management initiatives and stable market conditions driving top line gains, said UPS. Operating profit for the group headed up 14% to $170 million. UPS Freight revenue rose 9.9%  due to solid LTL pricing and tonnage growth, according to UPS. LTL revenue per hundredweight was up 5% to $24.76, and total quarterly shipments dipped 1.7% to 2.468 million

UPS CFO Richard Peretz said that the company’s focused business strategies are producing strong results in both the International and Supply Chain segments

“The benefits from our investments, new multi-year transformation efficiencies and stronger pricing position us well for shareowner value creation,” he said in a statement.

Looking ahead, UPS said it expects 2018 adjusted diluted earnings per share to be in a range of $7.03 to $7.37, with free cash flow of $4.5 billion to $5.0 billion in 2018. It also noted that the effective tax rate should be in a range of 23% to 24% for the remainder of the year, with 2018 capital expenditures to come in between $6.5 billion to $7.0 billion.

“UPS had an excellent quarter save for the operating profit for the domestic segment ( the engine that drives the rest of the UPS ship) which saw a drop from $950 million in the first quarter of 2017 to $756 million this year,” said Jerry Hempstead, president of Hempstead Consulting. “UPS blamed most of this on weather. UPS said they will focus on growth but really did not explain how they are going to do this on the earnings call. Most domestic growth is coming from e-commerce, which UPS handles but really has little to do with the magnitude of the growth and FedEx continues to gain on UPS’s market share.Yes, UPS is doing well but FedEx is doing far better.”