UPS Global 2Q Revenue Rises 7.7%; Net Income Jumps 9.1%
UPS Inc. generated 7.7% more global revenue during the second quarter and improved net income by 9.1% year-over-year based on “balanced performance across all segments,” North America’s largest trucking company reported July 27, as all three of its major segments were profitable.
The Atlanta-based corporation earned $1.38 billion, or $1.58 per share, on revenue of $15.75 billion. The company beat the EPS consensus from Bloomberg News by 11 cents a share.
In the 2016 second quarter, UPS earned $1.27 billion, or $1.43, on revenue of $14.63 billion.
International Package was the only segment not to increase operating profit, which declined to $583 million from $613 million in the 2016 second quarter. Revenue increased to $3.16 billion from $3.08 billion over the same time. Company managers estimated that the strengthening U.S. dollar diminished the division’s quarterly profitability by $114 million and offered a “currency neutral” profit figure of $697 million for International Package’s quarter.
Chairman and CEO David Abney said in the earnings call after the release of results that International Package’s 14.8% operating margin was “outstanding,” especially “in the face of currency headwinds.”
UPS’ two truck-heavy businesses are the ground segment of Domestic Package and less-than-truckload carrier UPS Freight.
Quarterly ground revenue grew by 7.6% to $6.97 billion. Volume rose by 4.2% year-over-year to 13 million packages per day.
UPS Freight, North America’s fifth-largest LTL, posted quarterly gains in revenue, number of shipments and gross weight hauled, and pricing. LTL revenue rose by 8.7% to $652 million for the quarter as total tonnage gained 8.1% to 2.76 billion pounds. LTL revenue per hundredweight — a measure of yield, or pricing, per 100 pounds of freight delivered — ticked up 0.6% to $23.62 from $23.47 in the 2016 second quarter.
Also during the call, executives spoke about UPS’ investment plans and operational changes.
Abney said the company is modernizing hubs in Arizona and Kansas and building one in Indiana.
Chief Financial Officer Richard Peretz said those projects are part of a plan to add 28 million to 35 million square feet of floor space by 2022 to accommodate business growth. He said an extra 5.5 million square feet of space is scheduled to be available by the end of next year.
Peretz said much of the additional package handing space is needed because of the growth in e-commerce deliveries to residences. Chief Commercial Officer Alan Gershenhorn, also speaking about e-commerce, noted that in-store pickup also is a popular option among consumers.
Peretz said the company has benefited from its shift on the administration of fuel surcharges. In February, UPS changed to two-week updates for surcharges from two-month updates. He said the greater frequency makes the surcharges more efficient and reflective of actual costs when prices change rapidly.
Abney re-emphasized the importance of international trade. For the quarter, the International Package division brought revenue of $3.16 billion. The Supply Chain & Freight division also has an international presence as a freight forwarder.
Abney said he wants consumers to be able to “shop the world” but that it should be done on a level playing field. He said government policies should promote the expansion of trade in an “open, rules-based system.”
