UPS Q3 Earnings Review: Rise in Shipments Continues To Drive Growth
Logistics giant UPS (NYSE:UPS) announced solid Q3 earnings on Thursday, October 27th. For the quarter ending September 30, the company posted revenues of $14.9 billion, an increase of 4.9% over the prior year quarter. Additionally, the company comfortably beat the $14.7 billion it had been expected to post in revenue, based on the analysts’ estimates compiled by Reuters. The uptick in revenues was driven by an increase in average daily package volumes, which increased 6% and 7.5% over the prior year quarter for U.S. Domestic Package and International Package, respectively. The rise in revenues and continued low cost of fuel positively impacted the company’s operating profits, which increased 2.5% over the prior year quarter and were reported at $2.03 billion. The company’s net income was $1.27 billion, an increase of 1% over the same period last year, while EPS grew 3% over the same period last year to $1.44, in line with the analysts’ estimates compiled by Reuters. In view of its performance in the current quarter, the company expects to match its full year earnings guidance of $5.70 to $5.90 per share.
Segment Performance
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U.S. Domestic Package segment, UPS’s main revenue contributor, continues to benefit from the growth in the e-commerce sector, with B2C deliveries increasing 11%. [1] For the quarter ending September 30, the segment’s revenue increased 5% over the prior year quarter to $9.3 billion, primarily aided by a 6% increase in average daily package volume. Within the segment, U.S. Deferred Packages showed the maximum growth, with its average daily package volume increasing 10% over the same period last year to 1.2 million. Next Day Air’s average daily package volume grew at 6% over the prior year quarter to 1.3 million and Ground shipments surged 5% over the same period last year to 12.7 million.
The International Package segment’s revenues grew marginally to $3 billion for the quarter, aided by a 7% rise in average daily package volume. The uptick in revenues positively impacted the segment’s operating profit, which rose 14% over the prior year quarter to $576 million. For the quarter, the segment’s operating margins grew 2 percentage points over the same period last year to 19%.
For the first nine months of the fiscal year, the company’s free cash flow declined 23% over the same period to $3.5 billion, as net cash from operations declined 16% while capital expenditures increased by 11%.
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Notes:- UPS Earnings Call Transcript, Seeking Alpha, October 27 [↩]