Here is a recap of the UPS earnings call from 10/26/2017.
“UPS produced another solid quarter of financial performance, despite the impact of several natural disasters that slowed regional economic activity and damaged infrastructure,” said David Abney, UPS chairman and CEO. “Our business segments adapted quickly to changing conditions this quarter, taking advantage of market opportunities while minimizing cost and service disruptions from recent events.”
- UPS Revenue Rises 7% on Balanced Shipment Growth and Yield Expansion
- U.S. Domestic Revenue up 3.9% on Higher Package Demand and Yields
- U.S. Operating Profit of $1.2B, Including $50M of Negative Hurricane Impact
- Supply Chain & Freight Boosts Revenue more than 13%; Profits up 9.7%
|Consolidated Results||3Q 2017||3Q 2016|
|Revenue||$15,978 M||$14,928 M|
|Operating profit||$2,035 M||$2,034 M|
|Currency-neutral operating profit*||$2,097 M|
|Diluted earnings per share||$1.45||$1.44|
For the total company in 3Q 2017:
- Revenue increased 7.0%, and currency-neutral revenue* was up 7.1%.
- Revenue increased in all segments and major product categories, as expanded customer demand spread across the company’s broad product portfolio.
- Operating profit was $2.0 billion, driven by strong performance in the International and Supply Chain and Freight segments.
- Year-to-date capital expenditures were $3.7 billion, supporting our investment strategies.The Domestic segment continues to benefit from online retail customer demand for both UPS Next Day Air and Ground services, which drove a 3.9% increase in revenue over 3Q 2016. The U.S. consumer increasingly prefers to shop online and UPS is benefiting from this trend through its unique portfolio of convenient and economical delivery solutions.
- U.S. Domestic Segment
|3Q 2017||3Q 2016|
|Revenue||$9,649 M||$9,289 M|
|Operating profit||$1,182 M||$1,252 M|
For the U.S. Domestic segment in 3Q 2017:
- Revenue increased $360 million or 3.9% over 3Q 2016, driven by Next Day Air and Ground product growth.
- Next Day Air daily shipments were up 8.0%, as customers continued to select UPS’s reliable, day-definite delivery solutions.
- Revenue per piece was up 2.0%, while base-rate pricing and higher fuel surcharges offset changes in customer and product mix.“Our International segment continued its track record as a growth engine, generating strong top-line and operating-profit growth driven by robust demand for UPS solutions,” said Abney. “Export shipments grew across all regions as customers took advantage of UPS’s expanded portfolio and enhanced network.”
|3Q 2017||3Q 2016|
|Revenue||$3,364 M||$3,024 M|
|Operating profit||$627 M||$576 M|
|Currency-neutral operating profit*||$689 M|
Supply Chain and Freight Segment
The Supply Chain and Freight segment produced record third quarter results with double-digit revenue growth and near double-digit operating profit expansion. Performance results were driven by revenue-quality improvements combined with structural cost-reduction programs.
|3Q 2017||3Q 2016|
|Revenue||$2,965 M||$2,615 M|
|Operating profit||$226 M||$206 M|
For the Supply Chain and Freight segment in 3Q 2017:
- Revenue increased 13% over 3Q 2016, the result of deeper alignment with preferred customers, strengthened revenue management initiatives and improved market conditions.
- Tonnage gains in Freight Forwarding, UPS Freight and Coyote Logistics contributed to improved top-line results.
- UPS Freight increased LTL (less-than-truckload) revenue by 9.3% on tonnage growth of 5.5% and LTL revenue per hundredweight gains of 3.6%.
- Increased customer demand from the retail and aerospace sectors drove the Distribution unit’s revenue and operating profit higher.
- Total segment operating profit improved 9.7% to $226 million.The company provides guidance on an adjusted (non-GAAP) basis because it is not possible to predict or provide a reconciliation reflecting the impact of future pension mark-to-market adjustments, which would be included in reported (GAAP) results and could be material.The company’s full-year 2017 adjusted earnings per share guidance includes the following:
- “UPS third-quarter results highlight the flexibility of our business” said Richard Peretz, UPS chief financial officer. “Our recent performance gives us confidence moving forward as we adapt to evolving, global ecommerce strategies with increased seasonality. We are executing well on our plans, have a positive outlook for peak and as a result, we are moving higher in our original guidance range.”
- Momentum in the business will continue, led by the International segment.
- Focus remains on delivering a successful peak season for customers and investors.
- Operating penalties for ongoing facility investments and Saturday deployment will be approximately $60 million in the fourth quarter.
- Currency headwinds will continue to weigh on year-over-year comparisons.