UPS Rides E-commerce Surge to 21% Jump in Package Volumes

By Paul Ziobro

United Parcel Service Inc. rode a pandemic fueled surge in e-commerce to higher profits and a 13% jump in revenue during the June quarter, underscoring how the illness upended daily life.

The delivery giant said its average daily shipping volume rose 21% in the quarter, faster than the company has ever recorded, with a 65% increase in shipments to homes.

"Our results were better than expected, driven in part by the changes in demand that emerged from the pandemic," said UPS's new chief executive, Carol Tome.

Shares rose more than 9% in premarket trading.

UPS and rival FedEx Corp. are being inundated with millions of extra daily packages after many retail stores were temporarily closed, pushing people to shop online for everything from toilet paper to pet food. Even as most stores have reopened, some shoppers remain reluctant to head to stores as coronavirus cases rise in parts of the U.S.

UPS has benefited from handling packages for Amazon.com Inc. after FedEx cut ties with the e-commerce giant last year.

UPS said it also had an increase in Covid-19 related health-care shipments and an increase in outbound packages from Asia.

The sudden growth comes at a cost, though, as the carriers incur greater expenses from more miles driven and fewer packages delivered per stop as they deliver more to homes instead of businesses.

Despite the surge of packages in the U.S., UPS's operating profit fell slightly in its main domestic segment. UPS's average revenue per package in the U.S. dropped 5% from a year ago.

Both UPS and FedEx are trying to offset some of the costs with new surcharges on large packages and on some of their lower-priced shipping services. The two companies have also started to impose higher rates on some of their shippers whose volumes have changed significantly in recent months.

Investors have been looking for signs that the carriers would start to wield their greater pricing power and extract to see higher returns from billions of dollars of investment in recent years on upgrading their networks with added capacity and more automation. The pandemic has sped up the timeline under which that was expected to occur amid the significant shift to online shopping in just a matter of weeks.

For the period, UPS reported a profit of $1.8 billion, or $2.03 a share, up from $1.7 billion, or $1.94 a share, a year earlier. Excluding some restructuring charges, UPS said adjusted earnings were $2.13. Revenue hit $20.3 billion. Analysts polled by FactSet expected UPS to post earnings of $1.07 a share, on revenue of $17.5 billion.

(END) Dow Jones Newswires

July 30, 2020 06:58 ET (10:58 GMT)

United Parcel Service (NYSE:UPS)
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