01—Abstract
Summary
Summary of the 10-K filed February 20, 2020. Cited figures are marked; the original filing is the authoritative source.
United Parcel Service (UPS) reported strong revenue growth for 2019, driven by increased package volumes, particularly in its U.S. Domestic Package segment.
While overall revenue rose 3.1% to $74.094 billiona, net income saw a decline of 7.3% to $4.440 billion, or $5.11 per diluted share. This decrease in profitability was largely attributed to significant transformation strategy costs, legal contingencies, and mark-to-market losses related to pension and postretirement benefit plans, which impacted reported earnings. Despite the net income dip, the company demonstrated operational improvements with a notable 11.0% increase in operating profit.
UPS continued to invest in its global logistics network, focusing on automation, technology, and capacity expansions to support growth in e-commerce, SMBs, and healthcare logistics. The company also announced a 5.2%b increase in its quarterly dividend and continues its share repurchase program, signaling confidence in its financial strength and commitment to returning value to shareholders.
02—Key points
Key Highlights
- Total revenue for 2019 increased by 3.1% to $74.094 billion, driven by a 5.8% increase in average daily package volume.
- Operating profit increased by 11.0% to $7.798 billion, reflecting improved operating margins across all segments.
- Net income decreased by 7.3% to $4.440 billion ($5.11 per diluted share), impacted by transformation costs, legal contingencies, and pension-related charges.
- The U.S. Domestic Package segment showed strong volume growth, up 7.0%, with Next Day Air and Deferred services leading the way, aided by a large customer, Amazon.
- International Package volume saw a slight decrease of 0.4%, with revenue declining 1.5% due to challenging economic conditions and currency headwinds.
- The company continued to invest heavily in its operations, with capital expenditures totaling $6.380 billion, focused on modernization and automation.
- UPS announced a 5.2% increase in its quarterly dividend to $1.01 per share, and anticipates repurchasing approximately $1.0 billion of shares in 2020.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 20, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $74.09B$71.86B | +3.1% |
| Operating Expenses | $66.30B$64.84B | +2.3% |
| Operating Income | $7.80B$7.02B | +11.0% |
| Interest Expense | $653.00M$605.00M | +7.9% |
| Net Income | $4.44B$4.79B | −7.3% |
| EPS (Basic) | $5.14$5.53 | −7.1% |
| EPS (Diluted) | $5.11$5.51 | −7.3% |
| Shares Outstanding (Basic) | 864.00M866.00M | −0.2% |
| Shares Outstanding (Diluted) | 869.00M870.00M | −0.1% |
05—Questions
Frequently Asked Questions
What were the main drivers of UPS's revenue growth in 2019?
UPS's revenue growth in 2019 was primarily driven by a 5.8% increase in average daily package volume across its segments, particularly in the U.S. Domestic Package operations, which benefited from strong growth from SMBs and key large customers like Amazon. Faster delivery options like Next Day Air and Deferred services also contributed significantly.
Why did net income decrease in 2019 despite revenue and operating profit growth?
Net income decreased by 7.3% due to significant one-time or non-recurring expenses. These included transformation strategy costs of $196 million (after-tax), legal contingencies and expenses of $91 million (after-tax), and substantial mark-to-market losses on pension and postretirement benefit plans totaling $1.816 billion (after-tax). These items, which are often excluded in adjusted earnings calculations, weighed down the reported net income.
How is UPS investing in its future growth and operations?
UPS continued its significant investment in transforming its business, with capital expenditures totaling $6.380 billion in 2019. These investments were focused on modernizing its network through automation, enhancing technology, expanding capacity, and supporting growth in key areas such as e-commerce, healthcare logistics, and services for small and medium-sized businesses (SMBs).
What is the company's outlook on returning capital to shareholders?
UPS demonstrated its commitment to shareholder returns by increasing its quarterly dividend by 5.2% to $1.01 per share, payable in March 2020. The company also plans to repurchase approximately $1.0 billion of its shares in 2020, indicating confidence in its financial position and ongoing operational performance.
06—Continue