UPS reports solid 3rd quarter earnings as package business grows worldwide
UPS (NYSE:UPS) today reported solid third quarter growth with revenues rising 7.7% and net income increasing 20.4%.
Total worldwide average daily volume increased by 445,000 packages per day to 13.7 million, a 3.4% increase. Total international export package volume grew 13.2%, while UPS Supply Chain Solutions posted strong growth with revenue up 10.1%.
“The reach and reliability of our global package delivery network is unmatched and we’re attracting new business as a result,” said Scott Davis, UPS’s chief financial officer. “We’re seeing double-digit export growth in every region of the world with strong profit increases to match.”
The CFO also said UPS continues to generate substantial positive cash flow and the Board of Directors has increased the company’s share repurchase authorization to US$2 billion.
For the three months ended Sept. 30, consolidated revenue totaled US$8.95 billion, up 7.7% compared to the USUS$8.31 billion reported during the prior-year period. Consolidated operating profit rose 9.7% to US$1.26 billion. Net income for the quarter was US$890 million compared to US$739 million reported for the same period in 2003.
The results for the third quarter in 2003 included a US$24 million gain on the sale of UPS Aviation Technologies as well as a US$22 million tax benefit due to a favorable tax ruling. The most recent quarter includes a US$99 million reduction to income taxes due to the resolution of various tax matters.
Excluding these items, third quarter operating profit increased US$135 million to US$1.26 billion, a gain of 12%. Adjusted net income totaled US$791 million this year compared to US$702 million in 2003, up 12.7%.
Earnings per diluted share were US$0.78 compared to US$0.65 the prior year. On an adjusted basis, earnings per diluted share totaled US$0.70 per share, up 12.9% compared to the prior year’s US$0.62. The adjusted US$0.70 per diluted share is within UPS’s guidance of US$0.69 to US$0.72.
For the nine months ended Sept. 30, consolidated revenues totaled US$26.74 billion, an increase of 8.9% compared to the prior-year period. Operating profit totaled US$3.79 billion, a gain of 19.3% compared to the period in 2003. Net income increased to US$2.47 billion, a gain of 20.8% compared to the period in 2003.
Third quarter highlights by company segments included:
International package revenue increased 21.6% to US$1.67 billion on a 13.2% gain in export package volume and a 4.1% increase in international domestic package volume. Asia export volume increased 29% as export volume out of China more than doubled. U.S. export volume led the industry with its fourth consecutive quarter of double-digit growth. Operating profit jumped 49% to US$262 million. International operating margin increased 290 basis points to 15.7%.
U.S. package revenue increased 4.4% to US$6.49 billion while operating profit climbed 3.9% to US$857 million. Both were impacted by a difficult September during which multiple hurricanes and tropical storms disrupted commerce across the U.S. and UPS operations in the Southeast and East. Average daily ground volume in the U.S. grew 4.5% for the quarter. Total Next Day Air® volume was down in the quarter due to the large amount of letters associated with mortgage refinancing activity last year. Excluding letters, Next Day package volume increased in the quarter. Average revenue per piece rose 1.5% for all U.S. products.
Revenue for the non-package segment climbed 9.5% to US$792 million. Excluding last year’s gain on the sale of UPS Aviation Technologies, operating profit increased 13.9% to US$139 million. Revenue for UPS Supply Chain Solutions, the largest unit in the non-package segment, increased 10.1% to US$591 million. The UPS SCS unit, with the pending acquisition of Menlo Worldwide Forwarding, will add guaranteed heavy air freight to its portfolio across the globe.
In addition to this month’s agreement to acquire Menlo Worldwide Forwarding, several other developments occurred during the quarter that will be instrumental to continued growth. Earlier in the period, UPS added air capabilities to its Trade DirectSM line of services, helping customers eliminate the need for warehousing after importing.
Last month, UPS added three additional flights to its “around-the-world” network to accommodate expanding package flows between Asia and Europe. And just this past Monday, the U.S. Transportation Department finalized its earlier award of aviation rights allowing UPS to triple its direct access to the fast-growing China market.
“We will keep building our capabilities as more customers turn to UPS to help them effectively manage their transportation and supply chain needs,” Davis added.
For the fourth quarter, Davis said the company is expecting a solid holiday shipping season in the United States and stellar growth outside the U.S. UPS is projecting fourth quarter diluted earnings per share to increase over last year’s adjusted US$0.70 to a range of US$0.83 to US$0.87. Davis added UPS expects earnings per share in 2005 to grow between 13-to-17%.
UPS is the world’s largest package delivery company and a global leader in supply chain services, offering an extensive range of options for synchronizing the movement of goods, information and funds. Headquartered in Atlanta, Ga., UPS serves more than 200 countries and territories worldwide. UPS's stock trades on the New York Stock Exchange (UPS) and the company can be found on the Web at UPS.com.
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