UPS reports 13% earnings increase on 7% revenue gain
UPS today reported strong financial performance for the second quarter, with all segments showing growth despite a lackluster economy in the United States and much of the world.
Highlights for the quarter included:
Earnings per diluted share increased 13% to $0.61 from $0.54 last year.
U.S. package volume increased 1.2%, paced by a 9.1% increase in Next Day Air® volume.
International profitability increased more than 150%.
Non-package profits climbed 34%.
“We’re quite pleased with our results this quarter as all units met our expectations,” said Scott Davis, UPS’s chief financial officer. “We’re also seeing each business segment contribute to the success of the other units as we deploy integrated solutions across the supply chain.”
For the quarter ended June 30, 2003, revenue totaled $8.23 billion, up 7.1%
from the $7.68 billion reported during the same period in 2002. Consolidated
operating profit increased 5.1% to $1.08 billion. Net income totaled $692 million, an increase of 13.3% over the prior year’s $611 million. The international segment led the company’s results, with revenue increasing
19.8% to $1.37 billion and operating profit surging 154.8% to $158 million. Operating margin for the segment was 11.5%, making this the third consecutive quarter with international operating margins over 10%. Worldwide export volume climbed 6.2%, led by a 15% gain in Asia.
The company attributed its strong international performance to increasing
customer acceptance of its broad portolio of services, favorable currency trends and strong revenue management. During the first quarter, UPS also introduced several new services such as Trade Direct Cross BorderSM, Exchange CollectSM and UPS World EaseSM to help customers simplify their cross-border business.
Within the U.S. domestic segment, revenue increased 3.7% over the prior-year
period to $6.12 billion while domestic operating profit fell 7.5% to $832 million. Profits declined mainly due to significant increases in health care and pension costs.
Domestic operating margins, while lower than last year, improved over the previous quarter. U.S. volume increased 1.2% to an average of 11.8 million packages per day.
Next Day Air volume increased 9.1% to an average of 1.2 million deliveries per day, driven largely by strength in the home mortgage sector. Ground and Deferred package volume also increased over last year.
Davis said the company is encouraged by the momentum in its U.S. business.
This is being driven by expanded customer relationships, such as with eBay;
technology solutions like CampusShip (a web-based shipping solution that simplifies multiple-location shipping), and improved customer access through The UPS Store
network.
The non-package segment saw revenues climb 16% to $731 million and
operating profits increase 34% to $90 million compared to the $67 million reported in 2002. The improvement was largely driven by the UPS Supply Chain Solutions unit,
which reported revenue of $530 million. During the quarter, this unit announced
several significant contracts to help customers manage and synchronize their global supply chains. These included new customers, such as Birkenstock, as well as existing customers like Lucent and Silicon Graphics that expanded services from UPS into new geographies.
Non-package results for the quarter were impacted by the sale of the
company’s Mail Technologies unit. The transaction reduced this segment’s operating income by $24 million, which was more than offset by a $38 million tax benefit,
leading to a net gain of $14 million, or $0.01 per diluted share.
“Looking to the third quarter, we expect to see additional improvement in our
U.S. domestic segment, with volume growth in the range of 2-to-3%,” Davis said. “We also anticipate our international business will continue to show solid growth and the positive trends in our non-package segment should continue.”
Davis also said the company expects third quarter earnings to be in the range of
$0.58 to $0.62 per diluted share compared to the $0.51 recorded during the period last year. The company remains on track to achieve its targeted earnings growth of 10-to-15% for the full year.
