- Profitability Improved Across all
Segments
- Pricing Initiatives Drove Yields Higher
- International Operating Profit Increased 14%; U.S.
Domestic up 11%
- European Export Growth of 9.4% Propelled International
Gains
- Revenue Increased 3.6% on a Currency-Neutral
Basis
- Reaffirmed 2015 Earnings Per Share Growth of
6-to-12%
UPS (NYSE:UPS) today announced first quarter 2015 diluted earnings
per share of $1.12, a 14% increase over the prior year period.
Operating profit increased 11% to $1.7 billion, with all three
segments contributing. Revenue management actions and robust
International shipment growth drove the operating profit
improvement.
Total reported revenue of $14.0 billion was up 1.4% over the
same quarter last year. Revenue growth was 3.6% after adjusting for
foreign currency changes.
"The first quarter results were favorably impacted by our
continued investments and revenue management initiatives," said
David Abney, UPS chief executive officer. "These actions delivered
high value to our customers and shareowners. We are on track to
achieve the company's long-term financial targets."
Total company shipments increased 2.8% to 1.1 billion packages,
led by European export growth of 9.4%.
Cash Flow
For the three months ended March 31, UPS generated $2.4 billion
in free cash flow. The company paid dividends of $636 million, an
increase of 9.0% per share over the prior year. The company also
repurchased more than 6.7 million shares for approximately $680
million.
U.S. Domestic Package
U.S. Domestic first quarter revenue increased 3.8% to $8.8
billion. Daily package volume improved 2.4%, lifted by growth
in Deferred Air, up 12% and UPS SurePost, up 7.0%. Shipment
growth rates slowed, as the company chose not to pursue some
lower-yielding contract renewals.
Total revenue per package was up 1.3% primarily due to UPS
Ground yield increasing 3.1%. Base rate improvements more than
offset an approximately 200 basis point drag from lower fuel
surcharges. The expansion of dim-weight pricing, implemented
last December 29, also contributed to higher yields.
Operating profit increased to $1.0 billion, an 11% improvement
from the prior-year period. Operating margin expanded 70 basis
points, driven by productivity gains.
International
Package
International operating profit was $498 million, up 14% over the
prior-year period. Volume growth, pricing initiatives and
lower fuel expense all contributed to improved
profitability. Operating margin expanded 280 basis points to
16.8%.
Total International revenue of $3.0 billion, increased 2.4% for
the quarter on a currency-neutral basis, compared to the reported
decline of 5.0%. Lower fuel surcharges also weighed on revenue
growth.
Worldwide Export yield contracted 5.2% on a currency-neutral
basis, with the majority of the decline due to an approximately 300
basis point reduction in fuel surcharge revenue. Product mix
changes and stronger intra-regional shipment growth also
contributed to the lower yield.
Export shipments jumped 6.7% led by European growth of
9.4%. In Europe, UPS Export volume has grown at an annual rate
of approximately 9% over the past 10 years.
Supply Chain &
Freight
Revenue in the segment increased 1.3% to $2.2 billion, driven by
growth in Distribution and UPS Freight. Revenue growth was
lowered by currency exchange rates and reduced fuel surcharge
revenue. Operating margin expanded to 6.9%, generating
operating profit of $151 million.
Although Forwarding revenue declined due to currency changes and
revenue management actions, profitability was improved over the
same period last year. Congestion at the West Coast port
terminals created challenges for many Ocean Freight
customers. The flexibility of the UPS portfolio allowed
customers to accelerate their ocean freight or reroute to
non-affected ports.
The Distribution business delivered solid top-line growth as
more customers in the Healthcare and Retail industries realized the
benefits of UPS supply-chain expertise. Operating profit and
margin was limited by continued investments in technology and
infrastructure.
UPS Freight revenue was up 2.3% resulting from gains in LTL and
Ground Freight Pricing products. Lower fuel surcharges weighed
on the revenue growth rate. LTL shipments per day increased
3.5% over the prior-year period.
Outlook
"Solid performance across all three business segments was led by
positive momentum in International, gains from revenue management
and productivity improvements in the U.S.," said Kurt Kuehn, UPS
chief financial officer. "We remain on plan to meet our
guidance for full-year 2015 diluted earnings per share of $5.05 to
$5.30, a 6%-to-12% increase over our 2014 adjusted results."
EDITOR'S NOTE:
UPS CEO David Abney and CFO Kurt Kuehn will discuss first
quarter results with investors and analysts during a conference
call at 8:30 a.m. ET, April 28, 2015. That call is open to
listeners through a live Webcast. To access the call, go to
www.investors.ups.com and click on "Earnings Webcast."
UPS routinely posts investor announcements on its web site
--www.investors.ups.com -- and encourages those interested in the
company to check there frequently.
UPS (NYSE:UPS) is a global leader in logistics, offering a broad
range of solutions including the transportation of packages and
freight; the facilitation of international trade, and the
deployment of advanced technology to more efficiently manage the
world of business. Headquartered in Atlanta, UPS serves more than
220 countries and territories worldwide. The company can be found
on the Web at ups.com® and its corporate blog can be found at
Longitudes.ups.com. To get UPS news direct, visit
pressroom.ups.com/RSS.
We supplement the reporting of our financial information
determined under generally accepted accounting principles ("GAAP")
with certain non-GAAP financial measures, including, as applicable,
"as adjusted" operating profit, operating margin, pre-tax income,
net income and earnings per share. The equivalent measures
determined in accordance with GAAP are also referred to as
"reported" or "unadjusted." Additionally, we disclose revenue
growth adjusted for the impact of foreign currency. We believe that
these adjusted measures provide meaningful information to assist
investors and analysts in understanding our financial results and
assessing our prospects for future performance. We believe these
adjusted financial measures are important indicators of our
recurring operations because they exclude items that may not be
indicative of, or are unrelated to, our core operating results, and
provide a better baseline for analyzing trends in our underlying
businesses. Furthermore, we use these adjusted financial measures
to determine awards for our management personnel under our
incentive compensation plans.
Because non-GAAP financial measures are not standardized, it may
not be possible to compare these financial measures with other
companies' non-GAAP financial measures having the same or similar
names. These adjusted financial measures should not be considered
in isolation or as a substitute for GAAP operating profit,
operating margin, net income and earnings per share, which are the
most directly comparable GAAP financial measures. These non-GAAP
financial measures reflect an additional way of viewing aspects of
our operations that, when viewed with our GAAP results and the
preceding reconciliations to corresponding GAAP financial measures,
provide a more complete understanding of our business. We strongly
encourage investors to review our financial statements and
publicly-filed reports in their entirety and not to rely on any
single financial measure.
Except for historical information contained herein, the
statements made in this release constitute forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934.
Such forward-looking statements, including statements regarding the
intent, belief or current expectations of UPS and its management
regarding the company's strategic directions, prospects and future
results, involve certain risks and uncertainties. Certain factors
may cause actual results to differ materially from those contained
in the forward-looking statements, including economic and other
conditions in the markets in which we operate, governmental
regulations, our competitive environment, negotiation and
ratification of labor contracts, strikes, work stoppages and
slowdowns, changes in aviation and motor fuel prices, cyclical and
seasonal fluctuations in our operating results, and other risks
discussed in the company's Form 10-K and other filings with the
Securities and Exchange Commission, which discussions are
incorporated herein by reference.
United Parcel Service,
Inc. |
Selected Financial Data
- First Quarter |
(unaudited) |
|
|
|
|
|
|
Three Months
Ended |
|
|
March
31 |
Change |
|
2015 |
2014 |
$ |
% |
(amounts in millions, except per share
data) |
|
|
|
|
Statement of Income
Data: |
|
|
|
|
Revenue: |
|
|
|
|
U.S. Domestic Package |
$ 8,814 |
$ 8,488 |
$ 326 |
3.8% |
International Package |
2,970 |
3,127 |
(157) |
-5.0% |
Supply Chain & Freight |
2,193 |
2,164 |
29 |
1.3% |
Total revenue |
13,977 |
13,779 |
198 |
1.4% |
|
|
|
|
|
Operating expenses: |
|
|
|
|
Compensation and benefits |
7,564 |
7,265 |
299 |
4.1% |
Other |
4,740 |
5,001 |
(261) |
-5.2% |
Total operating expenses |
12,304 |
12,266 |
38 |
0.3% |
|
|
|
|
|
Operating profit: |
|
|
|
|
U.S. Domestic Package |
1,024 |
927 |
97 |
10.5% |
International Package |
498 |
438 |
60 |
13.7% |
Supply Chain & Freight |
151 |
148 |
3 |
2.0% |
Total operating profit |
1,673 |
1,513 |
160 |
10.6% |
|
|
|
|
|
Other income (expense): |
|
|
|
|
Investment income |
4 |
-- |
4 |
N/A |
Interest expense |
(87) |
(90) |
3 |
-3.3% |
Total other income (expense) |
(83) |
(90) |
7 |
-7.8% |
|
|
|
Income before income taxes |
1,590 |
1,423 |
167 |
11.7% |
|
|
|
|
|
Income tax expense |
564 |
512 |
52 |
10.2% |
|
|
|
Net income |
$ 1,026 |
$ 911 |
$ 115 |
12.6% |
|
|
|
|
|
Net income as a percentage of revenue |
7.3% |
6.6% |
|
|
|
|
|
|
|
Per share amounts: |
|
|
|
|
Basic earnings per share |
$ 1.13 |
$ 0.99 |
$ 0.14 |
14.1% |
Diluted earnings per share |
$ 1.12 |
$ 0.98 |
$ 0.14 |
14.3% |
|
|
|
|
|
Weighted-average shares outstanding: |
|
|
|
|
Basic |
906 |
923 |
(17) |
-1.8% |
Diluted |
913 |
931 |
(18) |
-1.9% |
Certain prior year amounts have
been reclassified to conform to the current year presentation. |
|
|
United Parcel Service,
Inc. |
Selected Operating Data
- First Quarter |
(unaudited) |
|
|
|
|
|
|
Three Months
Ended |
|
|
March
31 |
Change |
|
2015 |
2014 |
$ / # |
% |
|
|
|
|
|
Revenue (in
millions): |
U.S. Domestic Package: |
|
|
|
|
Next Day Air |
$ 1,557 |
$ 1,590 |
$ (33) |
-2.1% |
Deferred |
896 |
855 |
41 |
4.8% |
Ground |
6,361 |
6,043 |
318 |
5.3% |
Total U.S. Domestic Package |
8,814 |
8,488 |
326 |
3.8% |
International Package: |
|
|
|
|
Domestic |
605 |
688 |
(83) |
-12.1% |
Export |
2,200 |
2,299 |
(99) |
-4.3% |
Cargo and Other |
165 |
140 |
25 |
17.9% |
Total International Package |
2,970 |
3,127 |
(157) |
-5.0% |
Supply Chain & Freight: |
|
|
|
|
Forwarding and Logistics |
1,330 |
1,333 |
(3) |
-0.2% |
Freight |
710 |
694 |
16 |
2.3% |
Other |
153 |
137 |
16 |
11.7% |
Total Supply Chain &
Freight |
2,193 |
2,164 |
29 |
1.3% |
Consolidated |
$ 13,977 |
$ 13,779 |
$ 198 |
1.4% |
|
|
|
|
|
Consolidated volume (in millions) |
1,101 |
1,071 |
30 |
2.8% |
|
|
|
|
|
Operating weekdays |
63 |
63 |
-- |
0.0% |
|
|
|
|
|
Average Daily Package
Volume (in thousands): |
U.S. Domestic Package: |
|
|
|
|
Next Day Air |
1,229 |
1,253 |
(24) |
-1.9% |
Deferred |
1,218 |
1,085 |
133 |
12.3% |
Ground |
12,321 |
12,078 |
243 |
2.0% |
Total U.S. Domestic Package |
14,768 |
14,416 |
352 |
2.4% |
International Package: |
|
|
|
|
Domestic |
1,577 |
1,530 |
47 |
3.1% |
Export |
1,125 |
1,054 |
71 |
6.7% |
Total International Package |
2,702 |
2,584 |
118 |
4.6% |
Consolidated |
17,470 |
17,000 |
470 |
2.8% |
|
|
|
|
|
Average Revenue Per
Piece: |
U.S. Domestic Package: |
|
|
|
|
Next Day Air |
$ 20.11 |
$ 20.14 |
$ (0.03) |
-0.1% |
Deferred |
11.68 |
12.51 |
(0.83) |
-6.6% |
Ground |
8.19 |
7.94 |
0.25 |
3.1% |
Total U.S. Domestic Package |
9.47 |
9.35 |
0.12 |
1.3% |
International Package: |
|
|
|
|
Domestic |
6.09 |
7.14 |
(1.05) |
-14.7% |
Export |
31.04 |
34.62 |
(3.58) |
-10.3% |
Total International Package |
16.48 |
18.35 |
(1.87) |
-10.2% |
Consolidated |
$ 10.56 |
$ 10.71 |
$ (0.15) |
-1.4% |
Certain prior year amounts have
been reclassified to conform to the current year presentation. |
|
|
United Parcel Service,
Inc. |
Reconciliation of Free
Cash Flow |
(unaudited) |
|
|
|
Preliminary |
|
Year-to-Date |
(amounts in millions) |
March 31 |
Net cash from operations |
$ 2,747 |
Capital expenditures |
(365) |
Proceeds from disposals of PP&E |
2 |
Net change in finance receivables |
(9) |
Other investing activities |
(9) |
Free cash flow |
$ 2,366 |
Amounts are subject to
reclassification |
Certain prior year amounts have
been reclassified to conform to the current year presentation. |
CONTACT: Andy McGowan, Public Relations
404-828-4663
Joe Wilkins, Investor Relations
404-828-8209
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