Atlanta-based logistics giant United Parcel Service (UPS) has announced third-quarter diluted earnings per share (EPS) of US$1.73, up more than 20%, and adjusted diluted EPS of $1.82, up 26%.
For the period, the company’s net income amounted to $1,508 million, or $1,581 million in adjusted terms, up from $1,259 million in the same quarter in 2017. Consolidated revenue in 3Q 2018 increased 7.9% and currency-neutral revenue was 8.4% higher.
Third quarter results benefited from several discrete items, including tax that helped to offset unplanned International headwinds from currency and fuel, said UPS in a statement.
“Our business strategies position UPS to improve operating leverage and many of our actions are already contributing to performance gains,” said UPS chairman and CEO David Abney. “We generated another quarter of industry-leading margins and strong free cash flow and we are confident in the outlook for the business.”
The U.S. domestic segment experienced strong revenue growth of 8.1% to $10.4 billion, driven by high demand for the company’s solutions and robust yield expansion compared to 3Q 2017. The segment also generated sequential yield improvements driven in part by a more disciplined approach to capture high-quality growth opportunities.
For its international segment, revenue increased in all regions in 3Q 2018 compared to the same period last year. Revenue was up 3% for the period; and up 5% in currency-neutral basis. Export volume also increased across all regions and exports grew nearly 3% on top of 19% growth last year. Year-over-year comparisons were affected by the strong 3Q 2017 growth UPS experienced in Europe.
Operating profit included headwinds primarily from currency and fuel, as well as some economic softening related to changing trade policies. Currency was a negative impact of $28 million, primarily from emerging markets.
Meanwhile, “supply chain and freight performance was outstanding this quarter, as the unit delivered double-digit growth in both revenue and adjusted operating profit,” Abney said. “UPS will continue to leverage our vast forwarding, customs, and supply-chain solutions to help customers expand their existing businesses and reach new markets.”
For the supply chain and freight segment in 3Q 2018, revenue increased more than 12% to $3.5 billion, as the business units benefited from strategies focused on small and medium-sized customers.
The forwarding business led all units with 17% revenue growth, as revenue management initiatives and high-value solutions generated yield improvement.
Freight revenue increased 11% on higher pricing and heavier shipments. Third quarter operating margin was 6.8%; adjusted operating margin expanded 120 basis points to 7.4%. Operating profit was up 24% to $242 million and adjusted operating profit increased 33% to $260 million.
Looking ahead, Richard Peretz, UPS’s chief financial officer, said: “Improvements in revenue quality and our new, highly-automated capacity gives us confidence in a successful peak season for our customers and shareowners.”
UPS expects 2018 adjusted diluted EPS to be in a range of $7.03 to $7.37. As previously guided, UPS expects 4Q18 adjusted EPS to increase about 15%, despite anticipated currency headwinds in emerging markets and one less operating day during peak season.
Photo courtesy of UPS
