Third quarter growth puts UPS in confident mood ahead of peak season
UPS appeared confident about its preparations for this year’s festive season peak, as it issued latest quarter results that were above analyst forecasts.
This year’s Christmas run-up is expected to see further record parcel volumes, with 11% growth forecast over last year.
The company, which struggled during last year’s festive season and had to take on extra workers to shift historically high parcel volumes, said it has put an extra $175m in its operational budget for this year, and has invested $500m in the infrastructure ahead of the peak.
UPS showed a 6.9% year-on-year increase in its global volumes in the third quarter of this year, when it handled 1.1bn shipments around the world.
The Atlanta-based package delivery giant saw its revenue grow 5.7% in the quarter, to $14.3bn, although the continuing shift towards more lightweight e-commerce packages meant revenue per package was down 1.5% compared to the same period last year.
Profit rose to $1.21bn or $1.32 per share in the quarter, up 13.8% on the same period last year.
Growth was driven by an improved profit margin in the US domestic package business and 9.4% growth in international export package volumes in Europe and Asia.
“It’s encouraging to see all three segments show positive momentum, as we head into our busiest time of year,” said Kurt Kuehn, UPS chief financial officer. “We expect another robust peak season and are confident our network is prepared to operate at the highest level. As a result, we are reiterating our expectations for adjusted diluted earnings per share to be in a range of $4.90 to $5.00, a 7-to-9% increase over 2013 adjusted results.”
US Domestic
The third quarter of 2013 saw US Domestic revenue up 5.3% year-on-year to $8.7bn, as daily package volumes grew 6.9%, led by UPS Ground and deferred services, up 7.7% and 5.9% respectively.
E-commerce drove a lot of the growth, but UPS said its business-to-business volumes were also up on last year. UPS SurePost, the residential ground service that uses the Postal Service for last mile delivery, and is popular for e-commerce packages, saw shipments increased by more than 50% in the quarter, contributing to the 1.5% decline in revenue per package.
Overall the UPS domestic package business saw profit margins up 30 basis points to 14.7%, with operating profit up 7.8% to $1.3bn.
International
UPS said its international revenue grew 5.5% in the third quarter, to $3.2bn, as daily package volumes grew 6.7% year-on-year.
Cross-border volumes were up 9.4%, with shipments out of Asia growing 16% and out of Europe by 14%.
UPS said its international operating profit improve by 10.3% to $460m as operating margin improved by 70 basis points to 14.5%.
Supply chain and freight
UPS said its Supply Chain and Freight division posted revenue of $2.4bn in the third quarter, up 7.4% on last year’s third quarter. Operating profit was up 7% to $215m.
Growth came mainly from distribution and UPS Freight business units, with strong demand from healthcare and retail customers.
