10-QPeriod: Q3 FY2017

UNITED PARCEL SERVICE INC Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 2, 2017For Securities:UPS

Summary

United Parcel Service (UPS) reported solid financial results for the third quarter and nine months ended September 30, 2017, demonstrating revenue growth across all segments driven by expanded customer demand. Consolidated revenue increased by 7.0% to $15.98 billion for the quarter and to $47.04 billion year-to-date. While net income saw a slight decrease of 0.5% to $1.26 billion in the third quarter, it grew by 3.7% to $3.81 billion year-to-date. Diluted Earnings Per Share (EPS) remained strong, at $1.45 for the quarter and $4.34 year-to-date. The company is investing in its infrastructure, including facility expansion and the rollout of Saturday operations, which contributed to increased operating expenses but is expected to support future growth. Key operational highlights include a 4.6% increase in average daily package volume for the quarter, driven by e-commerce growth. The International Package segment and Supply Chain & Freight segment showed particular strength in operating profit. The company continues to manage market risks through derivative instruments and maintains a strong liquidity position.

Financial Highlights

53 data points
Beta

Revenue

$16.17B

Net Income

$1.26B

7.8% Net Margin

EPS (Diluted)

$1.44

Total Assets

$41.36B

Cash & Equivalents

$3.42B

Free Cash Flow

$98.00M

Financial Statements
Beta
Revenue$16.17B
Operating Expenses$14.36B
Operating Income$1.81B
Interest Expense$111.00M
Net Income$1.26B
EPS (Basic)$1.45
EPS (Diluted)$1.44
Shares Outstanding (Basic)869.00M
Shares Outstanding (Diluted)874.00M

Key Highlights

  • 1Consolidated revenue grew 7.0% year-over-year for both the third quarter ($15.98B) and year-to-date ($47.04B), indicating sustained demand.
  • 2Net income for the nine months ended September 30, 2017, increased by 3.7% to $3.81 billion, while quarterly net income slightly decreased by 0.5% to $1.26 billion.
  • 3Diluted EPS rose 5.1% year-to-date to $4.34, and remained stable at $1.45 for the third quarter.
  • 4Operating profit for the nine months increased by 2.4% to $6.04 billion, supported by growth in all segments, despite a slight decrease in operating margin for the quarter.
  • 5Average daily package volume increased by 4.6% in the third quarter, reflecting continued e-commerce strength.
  • 6Significant capital expenditures are being made in facilities and technology to support future growth and modernization efforts.
  • 7The company maintained strong liquidity, with $4.46 billion in cash, cash equivalents, and marketable securities as of September 30, 2017.

Frequently Asked Questions

Revenue growth was driven by expanded customer demand across all segments, including U.S. Domestic Package, International Package, and Supply Chain & Freight. This was supported by an increase in average daily package volume and a rise in average revenue per piece, influenced by rate increases and product mix.

Operating expenses increased by 8.1% in the third quarter, primarily due to higher compensation and benefits, increased purchased transportation costs, and rising fuel prices. Investments in facility construction and the deployment of Saturday operations also contributed to higher costs, which the company aims to offset through operational efficiencies and technology.

UPS maintains a strong liquidity position with $4.46 billion in cash, cash equivalents, and marketable securities as of September 30, 2017. The company expects its current cash flow from operations, along with access to debt markets, to be sufficient to fund its operating requirements, capital expenditures, dividend payments, share repurchases, and debt obligations for the foreseeable future.

The company is involved in several legal proceedings, including a significant case concerning cigarette shipments to New York, where a district court found liability and awarded damages and penalties totaling $247 million plus interest. UPS is appealing this decision. While the company accrues for probable and estimable losses, the ultimate outcome of some of these matters remains uncertain and could potentially impact financial results.