UPS Lifts Revenue, But Costs Cut Profit -- WSJ

By Paul Ziobro

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 1, 2019).

United Parcel Service Inc. posted higher revenue for the fourth quarter as it handled more packages and squeezed higher prices from shipments, even as costs tied to expanding the company's network cut into profit.

The delivery giant said it expects its bottom line to improve this year, with operating profits up by double-digit percentages across all of its divisions after upgrades to its network start to pay off.

The results and outlook helped boost UPS shares 4.2% to $105.40, as the solid performance during the holiday season and higher prices showed progress the company is making in its turnaround plan.

UPS has been spending billions of dollars to open new sorting centers and upgrade its facilities to better handle the increase in online orders rushing into its network. Those investments helped the company hold up well during its latest holiday season, as the extra capacity and new technology to reroute packages around problem spots created fewer backlogs than prior years. UPS delivered 21 million packages a day in the U.S. during the fourth quarter and said its on-time delivery performance was a record.

Domestic operating profit fell during the period, even as its revenue rose 6.3%, because of costs tied to opening 14 new facilities in the quarter.

UPS expects some of that pressure to abate this year. One reason is a focus on generating more profitable revenue by targeting smaller and medium-size business and handling more health-care shipments, which can carry better margins than shipping packages for a large customer such as Amazon.com Inc.

"We do see 2019 as a pivot point," UPS finance chief Richard Peretz said on a conference call Thursday.

UPS diffused some concerns about the impact of any global trade disruptions or potential slowdown in places such as Europe. Last month, rival FedEx Corp. warned that weak economic conditions overseas would hurt its international business.

UPS Chief Executive David Abney said the company is seeing some of the same headwinds internationally, but that there is reason for optimism too, including online shopping. "E-commerce is providing all kinds of opportunities," Mr. Abney said Thursday.

For the fourth quarter, UPS posted a profit of $453 million, or 52 cents a share, down from $1.1 billion, or $1.26 a share, a year earlier. Excluding items such as mark-to-market pension adjustments and restructuring costs, adjusted earnings were $1.94 a share, compared with $1.66 last year.

Revenue rose 4.6% to $19.8 billion.

Analysts were looking for UPS to post adjusted earnings of $1.90 a share on revenue of $19.97 billion, according to FactSet.

For the coming year, UPS projects adjusted earnings between $7.45 and $7.75 a share. It said operating profit will rise by a low-teens percentage, with all segments up double digits.

The company also projects another big year of capital expenses as it continues to add automation, including 18 projects to build new or retrofit older facilities. It projects capital expenditures between 8.5% and 10% of revenue.

Write to Paul Ziobro at Paul.Ziobro@wsj.com

(END) Dow Jones Newswires

February 01, 2019 02:47 ET (07:47 GMT)

United Parcel Service (NYSE:UPS)
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