UPS earnings jump 25% during Q2
UPS has revealed a 25% growth in earnings for Q2 as company performance was boosted by “quality of revenue in US Domestic, superior export volume growth in International, and record Supply Chain & Freight results”. Earlier today (Tuesday), the company said that earnings stood at $1.06bn ($1.07 a share) for the quarter, compared to a figure of $845m (or $0.84 a share) for last year’s corresponding period.
Once items related to real estate transactions were excluded, earnings for the quarter stood at $1.05 a share. During the period, UPS recorded two real estate transactions that resulted in a net after-tax gain of $20m.
UPS also saw a sharp increase in revenues for the period, with figures jumping from $12.2bn for Q2 2010 to $13.19bn for 2011 – an increase of 8.1%.
In Q2, the company delivered 957m packages. Adjusted operating margin expanded by 110 basis points to 12.6%, while reported operating margin improved 140 basis points to 12.9%, UPS said.
Commenting today, Scott Davis, UPS chairman and CEO, said: “UPS’s results reflect the continued execution of our strategy and the ability to grow earnings in an uneven economic environment.
“Customers are recognising the value of the integrated solutions that leverage UPS capabilities around the globe and across the entire supply chain.”
For the six months ending June 30, UPS generated $2.3bn in free cash flow even after making accelerated pension contributions of $1.2bn. Capital expenditures for the period were $951m, as the company has added four B-767 and two B-747-400 aircraft to its fleet.
In addition, year-to-date, UPS paid dividends of more than $1bn, up 10.6% per share. The company also repurchased 14.4m shares for approximately $1.1bn.
Delivering his outlook for the rest of 2011, Kurt Kuehn, UPS’s chief financial officer, said: “Despite softening economic conditions, UPS delivered its highest ever second quarter earnings per share.
“These results were driven by the quality of revenue in US Domestic, superior export volume growth in International and record Supply Chain & Freight results.
“We remain confident in our ability to execute and surpass prior peak EPS this year. Although economic conditions will impact our performance, we reiterate guidance for 2011 adjusted diluted earnings per share to a range of $4.15-to-$4.40.”
UPS said that within its domestic division (US Domestic Package), operating profit improved 31% on an adjusted basis with revenue growth of 6.4%. Volume growth was flat as a result of the slow US economy. Adjusted operating margin expanded 240 basis points to 12.7% due to higher yields and network efficiencies.
On a reported basis, including the negative impact of a $15m real estate transaction, operating profit increased 29% and operating margin expanded by 220 basis points to 12.5%.
Revenue for the International Package segment improved 13.3% driven by an export volume increase of 8.1%, with Europe and China continuing their strong growth trends. Revenue per piece climbed 6.3% with currency, fuel surcharges, rate increases and product mix all contributing. Currency translation and hedging programs negatively impacted operating profit by more than $50m. Continuing the expansion of its Asian air network, UPS launched a new flight this week to serve western China.
In terms of UPS’s Supply Chain and Freight division, operating profit climbed 41% on an adjusted basis to $187m with revenue growth of 7%. The adjusted operating margin for the segment increased 200 basis points to 8.1%. This was driven by significant improvements in the Forwarding business as a result of revenue management initiatives and favorable buy rates. On a reported basis, including the positive impact of a $48m real estate transaction, operating profit increased 77% and operating margin grew 410 basis points to 10.2%. UPS Freight revenue increased 19% over the prior-year period, driving improved profitability. The business saw strong increases in LTL revenue per hundredweight and gross weight hauled, up 11.2% and 6.2%, respectively.
Earlier today, UPS confirmed it has introduced new flights into Chengdu, China, which will expand the company’s connections between Asia, Europe and the US.
