UPS earnings jump 23% on 18% revenue growth
Led by strong worldwide gains in package volume and the expansion of its supply chain and freight business, UPS (NYSE:UPS) today reported a 17.9% increase in revenue and an adjusted 22.9% increase in diluted earnings per share.
For the three months ended Sept. 30, 2005, earnings per diluted share were $0.86 compared to the $0.78 reported in the prior year. Adjusting for a tax credit that positively impacted earnings in 2004's third quarter, diluted earnings per share rose 22.9%, up from $0.70 a year ago.
"This has been a great quarter of growth for UPS," said Mike Eskew, UPS chairman and CEO. "We have tremendous momentum right now in the U.S. and around the world and we see it continuing."
Consolidated revenue for the period climbed to $10.55 billion, up from the $8.95 billion reported in the prior-year period. Consolidated operating profit jumped 19.1% to $1.5 billion, while net income totaled $953 million. Global average daily package volume increased by 4.7% – or 644,000 additional packages per day – to 14.3 million.
In the U.S., a 4% gain in average daily volume exceeded economic growth rates. This volume gain was paced by a 6.1% increase in Next Day Air® packages. Average daily ground package volume rose 3.6%. Outside the United States, total average daily package volume rose 11.2% to 1.5 million a day, paced by double-digit gains in Europe and Asia.
Highlights by segment for the third quarter included:
U.S. domestic package revenue grew 6.9% during the period to $7.03 billion. All products experienced volume growth. Operating profit rose 18% to $1.11 billion. Pricing remained firm.
International package revenue increased 14.5% to $1.92 billion. Operating profit climbed 19.5% to $318 million. Export volume grew 12.5%, led by Asia export volume gains of 26%. China again drove Asia with export volume rising 34%.
Revenue for the supply chain and freight segment jumped 130% to $1.6 billion, reflecting the positive impacts of both the Menlo Worldwide Forwarding and Overnite acquisitions. Operating profit climbed 37.3% to $70 million.
The strong financial performance capped a quarter of service expansion and acquisition activity. On the international front, UPS became a sponsor of the 2008 Olympics in Beijing and acquired LYNX Express Ltd. in the UK. In the U.S., the company closed its acquisition of Overnite, while UPS Supply Chain Solutions opened a new healthcare logistics facility in Louisville and a new distribution center campus in southern California. The company also announced significant enhancements to its UPS Trade DirectSM service to provide visibility for freight movements as well as for small packages.
For the full year, Chief Financial Officer Scott Davis said UPS should meet its expectation of an 18-to-20% increase in diluted earnings per share compared to the adjusted $2.90 reported in 2004. (The 2004 diluted earnings per share on a GAAP basis were $2.93.)
For 2006, Davis said UPS expects an increase in diluted earnings per share of 11-to-16% on top of this year's anticipated very strong performance. The global small package business should remain strong, he continued, resulting in exceptional operating profit in both the domestic and international segments. UPS also expects to see steady improvement in its supply chain and freight services business, Davis added.
"Our guidance for 2006, following an excellent performance in 2005, demonstrates our confidence in the soundness of our business strategy and our ability to execute," the CFO added.
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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