UPS Sees Growth Driven by Higher Pricing, Ecommerce Demand

By Aisha Al-Muslim

United Parcel Service Inc. reported higher revenues in its latest quarter as the delivery company experienced strong growth driven by higher base pricing and ecommerce demand in the U.S.

The Atlanta-based company reported $10.35 billion in revenue, up 6.3%, in its U.S. domestic package business. Over all for the period, total revenue surged 9.6% to $17.46 billion, ahead of the consensus forecast of $17.33 billion from analysts polled by Thomson Reuters. The company said its average daily package volume was 19.1 million, up 3% from a year earlier, while the average revenue per piece was $11.26, up 4.6%.

UPS had a profit of $1.49 billion, or $1.71 a share, up from $1.38 billion, or $1.58 a share, a year earlier. Adjusted earnings were $1.94 a share, beating analysts' estimates of $1.93 a share.

UPS operating profit fell 25.2% in its U.S. domestic package segment during the quarter, while overall operating profit fell 13%. Operating profit was primarily reduced due to planned increases in pension expense and costs for ongoing network projects.

UPS reaffirmed its previously guided full-year adjusted earnings per share of $7.03 to $7.37. Capital expenditures in 2018 are planned between $6.5 billion to $7 billion.

The stock fell 0.6% to $111.73 in premarket trading Wednesday. Shares are down 0.7% in the last year.

On Tuesday, UPS announced its plan to offer retirement-eligible employees a financial buyout to retire will generate annual savings of around $200 million when fully enacted. This initiative, introduced in April, will reduce UPS headcount and lower ongoing staffing expenses.

In the second quarter, UPS saw a pretax charge of $263 million, or 23 cents a share after-tax, due to the buyout costs.

UPS has been upgrading technology systems as it faces heavy competition from FedEx Corp. and Amazon.com Inc. as well as ever-growing e-commerce shopping demands. The company still relies on some outdated equipment and manual processes, but it is opening new automated facilities and working on technology upgrades as part of a $20 billion capital-spending plan.

Last week, The Wall Street Journal reported UPS is working on an analytics and machine learning project to gather and consolidate data from various applications within the company's logistics network to better predict package flow, volume and delivery status.

Separately, UPS started a pilot program in New York City for deliveries to apartment building lobbies or package rooms in a partnership with "smart access" company Latch. The system lets people use smartphones to unlock doors, and angled cameras capture footage that users can monitor from a mobile app.

Write to Aisha Al-Muslim at aisha.al-muslim@wsj.com

(END) Dow Jones Newswires

July 25, 2018 08:05 ET (12:05 GMT)

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