UPS first quarter results reflect impact of harsh US winter

United Parcel Service (UPS) has announced its first-quarter 2019 earnings and revealed that severe winter weather conditions lowered profit by approximately $80 million.  

First-quarter adjusted results exclude a pre-tax charge of $123 million, or $0.11 per share after tax, due to Transformation-related charges.  These projects will create efficiencies across the enterprise and produce higher-quality revenue growth.

Consolidated revenue increased to $17.2 billion, driven by gains in average daily volume and higher-quality revenue.

“The first quarter marked a good start to the year, as we executed against our strategy and generated solid performance across our business,” said David Abney, UPS chairman and CEO. “Our Transformation initiatives are enhancing revenue quality and creating network efficiencies that will increase our long-term earnings power. We are on a path to take advantage of growth opportunities and enhance our future performance.”

For US Domestic revenue increased $253 million or 2.5% over 1Q 2018, with healthy growth in commercial Ground.

Investments in new automated hubs contributed to improvements in operational measures including productivity gains and slower growth in unit costs.

“We are bending the cost curve in our U.S. Domestic segment as highly automated hubs come online, producing improved productivity benefits,” said Abney. “These improvements contributed to the segment’s performance in the quarter and will continue to gain momentum going forward.”

The International segment reported record first-quarter operating profit, reflecting the strength and flexibility of the company’s global network and its ability to execute in a changing global trade environment. Operating margin was 15.3% and 17.7% on an adjusted basis. The adjusted margin expanded 90 basis points+ over the prior period.

Supply Chain and Freight produced strong profit growth in the quarter- up nearly 18%.  The segment also expanded operating margins, driven by disciplined cost-management initiatives and the flexibility of the network to adapt to changing market conditions.

“Supply Chain and Freight generated excellent operating profit this quarter, with strong contributions from Coyote and the rest of our Forwarding unit,” said Abney. “We continue to execute our asset-light strategies, while providing our customers with the high-quality service they expect.”