Category: UPS News

Despite the U.S. economy sputtering a bit in the first quarter, transport giant United Parcel Service (UPS) delivered with its latest results.

The package delivery company reported first quarter earnings of $1.32 a share, beating Wall Street forecasts for $1.29 a share. Total revenue rose 6.2% to $15.3 billion, ahead of estimates for $15.2 billion. Excluding the impact of currency fluctuations, UPS saw sales rise 7.5%. Sales in the U.S. gained 5% on the back of average daily volume growth of 2.6% and higher delivery prices. It helped, too, that UPS continued to benefit from the shift toward online shopping. Meanwhile, international average daily volume rose 12.1%.

E-commerce growth is proving expensive for United Parcel Service Inc. The delivery giant saw strong gains in domestic package volume in the first quarter, but the WSJ’s Paul Ziobro and Joshua Jamerson report that costs are also racing upward as the deliveries grow more expensive to complete and the company builds infrastructure to match changing consumer buying patterns. UPS says shipments to homes, a proxy for e-commerce deliveries, rose about 7% in the first quarter, ahead of the 2.6% volume increase in its U.S. parcel business. Those home deliveries are tougher to serve than the more concentrated and economical business-to-business deliveries. UPS is also building two regional hubs that will rely heavily on automation, taking some of the labor cost out of its distribution channels. It’s not all about cost: UPS saw operating profit at its supply chain and freight division jump nearly 22%, partly from the need driven by e-commerce for companies to store more goods closer to where shoppers live.

United Parcel Service Inc (UPS.N) reported a higher-than-expected quarterly net profit on Thursday as revenue grew across its domestic and international package delivery segments and as well as freight and supply chain operations.

Often seen as a bellwether of U.S. economic activity, UPS said revenue increased to $15.315 billion in the first quarter from $14.418 billion in the year-ago period, above expectations of $15.17 billion in revenue.

“We think of it as a good start, and we’re determined to have a good finish to the rest of the year,” Chief Executive Officer David Abney said in an interview with Reuters.

United Parcel Service Co was awarded a five-year $2.35 billion contract, the Pentagon said on Wednesday.

The indefinite-delivery/indefinite-quantity, fixed-price next generation delivery service contract provides express small package delivery services for international shipments and express and ground small package delivery services for domestic shipments, the Pentagon said in a statement.

 

Factors Likely to Influence this Quarter

United Parcel struggled in the most recent holiday season, thanks to higher package delivery costs. The escalated costs are likely to hurt first-quarter 2017 results. Foreign currency-related headwinds are also expected to hurt the first quarter results. Unfavorable product mix and weakness in industrial production may dampen the company’s first quarter performance.

However, the company’s decision to hike dividend by 6.4% in the first quarter is encouraging. United Parcel’s efforts to expand and grow its top line also raise optimism. In a bid to speed up operations in the U.K. and European truckload brokerage operations, the company acquired Freightex Ltd in Jan 2017. The expanded product portfolio might aid first quarter results.