UPS’ Q2 2017 Earnings Review: Robust Shipment Growth Drives Earnings Improvement

by Trefis Team
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UPS reported a sharp increase in its second quarter earnings driven by robust top line growth and supported by effective cost management.

The company reported considerable growth in shipment volumes for both its domestic and international package businesses. Robust growth in e-commerce shipments, particularly B2C shipments, drove the growth in domestic package volumes. A rising share of online purchases in consumer retail sales has driven the growth in UPS’ domestic package volumes in recent quarters and this trend should continue to drive growth in the division’s shipment volumes going forward. Besides higher shipments, the U.S. Domestic division benefited from improved price realization as a result of higher base rates and fuel surcharge revenue. The International Package segment reported shipment growth of nearly 6% driven by rising volumes in Europe amid strengthening economic conditions in the region. [1] However, currency headwinds impacted both the division’s average realized price and revenue.

UPS continues to make investments in order to upgrade and expand its network. Greater automation and the application of connected technologies has enabled the company to increase its operational efficiency and moderate the growth in operating expenses. In addition, the company expanded its global footprint in Q2 with the acquisition of Newline, a leading Irish small package delivery company, and the recent announcement of a joint venture with Chinese delivery company SF Express (pending regulatory approval). [1] The joint venture with SF Express will enable the company to capitalize on business opportunities created by the Chinese e-commerce market. Thus, UPS’ expanding global footprint should drive growth in the company’s top line in the coming quarters.

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Notes:
  1. UPS’ Q2 2016 Earnings Call Transcript, Seeking Alpha [] []
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