UPS 1st quarter earnings rise 24percent on strong revenue growth

UPS has reported an 11.3percent increase in revenue and a 24percent gain in net income for the first quarter, reflecting strong results in all three business segments.

Scott Davis, UPS’s chief financial officer, pointed to three highlights for the quarter including an increase in average U.S. ground and air volume of nearly 600,000 packages a day, or 5percent; a doubling of international profit to USD269 million, and double-digit revenue growth in the UPS Supply Chain Solutions unit.

“We clearly are reaping the benefits of our strategy to provide broad solutions across the supply chain,” added Davis. “Increasingly, we are seeing each segment of our business help fuel the growth of other business units.”

For the three months ended March 31, consolidated revenue totaled USD8.92 billion, up 11.3percent from the USD8.02 billion reported during the prior-year period. Consolidated operating profit jumped 28.8percent to USD1.22 billion, almost equaling the operating profit reported for the most recent fourth quarter, which includes the peak holiday season.

Net income totaled USD759 million, an increase of 24percent over the prior year’s USD611 million. Earnings per diluted share were USD0.67, up 24percent from the USD0.54 reported for the first quarter of 2003. In that prior-year period, net income was affected by a reduction in income taxes and a write-down in marketable securities. Excluding those items, net income for the most recent period rose 28percent from USD593 million, and earnings per diluted share increased 29percent from USD0.52 reported in 2003.

Highlights by segment included:

International package continued its exceptional performance with revenues climbing 24.3percent to USD1.62 billion. Operating profit for this segment increased 101percent to USD269 million. Operating margin reached 16.6percent, the highest ever in this segment. Export volume was strong around the world, with U.S. exports up almost 13percent. UPS operations in China recorded a nearly 60percent surge in export volume.

U.S. package revenue rose 8.6percent to USD6.54 billion. Operating profit climbed 18percent to USD831 million and margins improved 100 basis points to 12.7percent. Average daily volume in the U.S. showed a strong 5percent gain, with ground volume jumping 5.2percent. Next Day Air® and deferred air volume grew a healthy 3.1percent and 5.8percent, respectively. Average revenue per piece rose for all products, with the overall U.S. average revenue per piece increasing 1.7percent.

Revenue for the non-package segment grew 9.7percent to USD760 million, with revenue from the UPS Supply Chain Solutions unit increasing more than 12percent. Operating profit for the segment rose 9.3percent to USD117 million.
“We saw strong margins across all three segments and that’s very encouraging,” said Davis. “Each segment is hitting its stride and our supply chain and technology capabilities – coupled with the reliability of our global network – are making us an attractive ‘one-source provider’ to customers.”

Several developments during the first quarter positioned the company well for future growth. UPS is in the process of rolling out proprietary technology that streamlines its pickup and delivery operations. This new technology will improve service and lower operating costs. Through the end of the quarter, deployment was complete in 131 out of 1,060 sites. That deployment will accelerate in the second quarter.

Other developments included gaining the authority to operate six additional flights between Hong Kong and the Philippines via Singapore; acquiring the remaining stake of UPS’s joint venture in Japan, making its operation there wholly-owned; unveiling significant enhancements to its customer shipping technology products, including UPS CampusShip™, Quantum ViewSM Manage and Flex® Global View, and announcing plans to open another 1,700 The UPS Store locations over the next three years.

In looking ahead, Davis said the company projects second quarter earnings in the range of USD0.67 to USD0.72 per diluted share versus an adjusted USD0.60 last year. He said the company is well on track to achieve its goal of 12-to-18percent earnings growth in 2004 and now expects to reach the higher end of that guidance for the full year.

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