UPS Sees Growth Driven by Higher Pricing, E-commerce Demand

By Aisha Al-Muslim and Patrick Thomas

United Parcel Service Inc. reported higher revenues in its latest quarter as the delivery company experienced strong growth driven by higher base pricing and e-commerce demand in the U.S., but profits were stifled by increased expenses.

The Atlanta-based company reported $10.35 billion in revenue, up 6.3%, in its U.S. domestic package business. Overall 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.

Profits in the U.S. package business were down in part due to increased investments in the company's network. Chief Executive David Abney said in the company's earnings call that it will open its second-largest domestic ground hub in Atlanta over the next couple weeks. He said the new facility "incorporates the latest automated sortation and network control technologies."

"While operating profit is not currently where we wanted to be, there are several initiatives under way to improve the bottom line results, and clearly, the segment will also benefit as we advance our transformation strategies," he said.

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 The company still relies on some outdated equipment and manual processes, but it is opening new automated facilities and working on technology upgrades as part of a $20 billion capital-spending plan.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.

The CEO also said the company hasn't yet been impacted by the Trump administration's escalating disputes with major U.S. trading partners, but warned of the dangers a trade war could bring.

"UPS has long supported the advancement of free-trade principles. We are advocating for future trade discussions," Mr. Abney said. "We're closely monitoring the changing trade landscape. There will always be some exposure or risk of our business, but that exposure is very much limited."

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

(END) Dow Jones Newswires

July 25, 2018 10:24 ET (14:24 GMT)

United Parcel Service (NYSE:UPS)
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