UPS announces 12% increase in share earnings
UPS has announced second quarter (Q2) 2015 diluted earnings per share of $1.35, a 12% increase over adjusted results for the same period last year. In a statement issued today (28 July), UPS said that all its business segments improved their operating profits and margins, led by International and Supply Chain and Freight performance.
Total revenue declined 1.2% from the same quarter last year to $14.1bn. However, the company added that currency exchange rates and lower fuel surcharges played their part in reducing revenue growth.
“During the quarter, UPS continued to invest for the future by expanding capacity and launching new capabilities that provide higher value to customers,” said David Abney, UPS chief executive officer. “The strong momentum in our International segment is expected to continue and gives us confidence in achieving the upper end of our guidance range.”
Operating profit increased $1.2bn and total company shipments increased to 1.1bn packages, up 2.1% on Q2 2014, led by U.S. Deferred Air products and International Export shipments.
For the six months ended June 30, UPS generated $3.3bn in free cash flow.
In the US Domestic package sector, revenues for Q2 2015 were $8.8bn, up $140m on last year. Shipment growth was led by Deferred Air products, which was up 15%, and UPS SurePost, which increased more than 8%. Total daily deliveries grew 1.8% due to a slower pace of B2C (business-to-consumer) growth.
Operating profit was $1.2 billion, up $35 million on last year, and “operating margin expanded to 13.6% as improved pricing and productivity offset higher benefit costs”.
Revenue per package was flat, said UPS, as changes in fuel surcharges dropped reported yield by almost 300 basis points.
In the international package sector, revenue was up 1.5% over the same period last year. UPS daily export shipments increased 5.5%, primarily due to an 8.5% increase in intra-Europe shipments. The strong dollar drove US imports higher, while US exports were down slightly. International operating profit increased $81m, or 17% over the adjusted results for the same period in 2014.
“Network improvements, volume growth and pricing initiatives all contributed to expanded operating margin and increased profitability,” said UPS. “The segment experienced growth from middle-market accounts and improved premium product sales.”
Underlying base rates were up across all regions, though revenue per package decreased 2.4% on a currency-neutral basis. Lower fuel surcharges reduced reported revenue per package by about 350 basis points.
Supply Chain & Freight revenue declined 4.5% to $2.2bn, due to Forwarding revenue management initiatives, currency and lower fuel surcharges at UPS Freight. However, operating profits improved $31m, or 18% over the adjusted results for the same quarter 2014, driven by gains in Forwarding.
Summing up the performance, Richard Peretz, UPS chief financial officer, said: “The second quarter results reflect continuing gains in our International business.
“Even though the US economy appears to be growing at a slower pace, our global portfolio and performance reinforces our expectations to attain the higher-end of the guidance range.”
