UPS reports first quarter revenue is up 4.4 percent at $13.1 billion

First quarter revenue for transportation and parcel giant UPS increased 4.4 percent to $13.1 billion, the Atlanta-based company announced today. Quarterly adjusted operating profit rose 6.6 percent to $1.57 billion, and earnings per share of $1.00 was up ten percent annually, falling just short of Wall Street estimates of $1.01 per share. Quarterly net income at $970 million was up 6.6 percent.

The company’s U.S. Domestic and Supply Chain and Freight segments paced quarterly growth for the company, with 13 and 19 percent gains in operating profit, respectively.

“We announced our intention to acquire TNT Express, an investment that will contribute to our growth for many years to come. And our first quarter results built upon momentum from last year. We continue to see strong demand for UPS products and services, especially in the U.S. and Europe.”

Davis noted that in January UPS said that expectations for the U.S. economy were improving, especially when compared to the rest of the world. And during the quarter, he said most of the positive economic news has come out of the U.S., with signs of an economic rebound—including increased retail sales and an improving employment environment—being evident. But other economies continue to face challenges, in the form of Europe’s struggles with austerity measures and slowing growth out of Asia, too.

Even with those challenges, Davis said UPS continues to see its export volumes in Europe and intra-Asia perform well, as it continues to grow in these areas through acquisition, including TNT Express and February’s acquisition of Brussels-based Kiala, a technology provider with a platform that allows e-commerce retailers (e-tailers) to offer consumers the option of having goods delivered to a convenient retail location.  

In the fourth quarter, consolidated average daily package volume of 15.6 million packages was up 4.3 percent, with total U.S. domestic packages averaging 13.2 million for a 4.5 percent gain and total international packages up 2.8 percent at 2.35 million packages per day. U.S. domestic package next-day air was up 5.0 percent at 1.213 million packages per day and deferred—at 985,000 packages—and ground at 11.0 million packages—were up 9.9 percent and 4.0 percent, respectively.

The 4.0 percent bump in ground shipments was driven by a 30 percent increase in lightweight products, which are gaining traction with UPS customers.

USP CFO Kurt Kuehn said on the call that the 4.3 percent uptick in total daily package volume was strong as online shipping continued its rapid growth from last quarter.

Consolidated revenue per piece at $10.86 was up 0.9 percent, with U.S. domestic packages and international package averages at $9.45 and $18.83 up 1.6 percent and down 0.1 percent, respectively.

Supply chain and freight revenue at $2.166 billion was up 1.3 percent, with operating profit up 19.4 percent at $166 million. And revenue for UPS Freight, the company’s less-than-truckload unit, at $618 million was up 2.3 percent.  International package revenue at $2.966 billion was up 2.3 percent.

Consolidated average revenue per piece at $10.86 was up 0.9 percent annually, with total U.S. domestic package up 1.6 percent at $9.45. U.S. Next Day Air was off 0.8 percent at $20.06, and Deferred and Ground at $13.01 and $7.96 were down 0.9 percent and up 2.2 percent, respectively. Total average International Package revenue per piece at $10.86 was up 0.9 percent. International Domestic at $7.10 per piece was up 0.6 percent, and International Export at $36.37 was off 2.2 percent.

“As we saw in the fourth quarter, a strong demand for UPS Saver lightweight products like SurePost impacted yield growth,” said Kuehn. “Base pricing was up 2.5-to-3 percent and was somewhat offset by changes in product and customer mix. The impact on yields will begin to moderate as we ramp the build out of our SurePost launch. This will become most evident by the fourth quarter.”

In an interview with LM, Jerry Hempstead, principal of Hempstead Consulting, explained that some of UPS’s increased revenue and yields came from a higher fuel surcharge, which in recent years has seen a portion of fuel surcharges “baked” into its base rates.

“The real story is e-commerce, B2C and the amazing success of SurePost and its contribution to the yield improvement,” he said. “It appears UPS is clicking on all cylinders although International yield is not as it had been.Of great interest is the tremendous yield improvement there has been in the domestic business.Much of that garnered through the rate increase that went into effect January 3. And since the United States Postal Service is not going to be able to raise rates or lower service based on the Senate version of pending legislation this is also going to continue to help drive yield improvement.”