10-QPeriod: Q1 FY2018

UNITED PARCEL SERVICE INC Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 3, 2018For Securities:UPS

Summary

United Parcel Service, Inc. (UPS) reported strong revenue growth for the first quarter of 2018, with consolidated revenue increasing by 10.3% year-over-year to $17.113 billion. This growth was driven by robust demand across all segments, particularly in International Package and Supply Chain & Freight operations. Despite the top-line growth, consolidated operating profit saw a slight decrease of 6.0% to $1.520 billion, primarily due to increased operating expenses. Factors contributing to higher expenses included unfavorable weather conditions in the U.S., investments in new facilities and technology, higher fuel costs, and increased compensation and benefits. Diluted Earnings Per Share (EPS) rose by 16.5% to $1.55, reflecting improved net income and a lower effective tax rate due to the Tax Cuts and Jobs Act. UPS continues to invest in its infrastructure, with capital expenditures totaling $1.537 billion in the quarter, focused on fleet modernization, facility automation, and technology enhancements. The company also actively managed its capital structure through share repurchases and dividend payments. While operational challenges impacted U.S. Domestic Package segment profitability, the overall financial performance indicates resilience and continued strategic investment in future growth.

Financial Highlights

53 data points
Beta

Revenue

$17.11B

Net Income

$1.34B

7.9% Net Margin

EPS (Diluted)

$1.55

Total Assets

$44.46B

Cash & Equivalents

$3.54B

Free Cash Flow

$2.53B

Financial Statements
Beta
Revenue$17.11B
Operating Expenses$15.59B
Operating Income$1.52B
Interest Expense$153.00M
Net Income$1.34B
EPS (Basic)$1.55
EPS (Diluted)$1.55
Shares Outstanding (Basic)866.00M
Shares Outstanding (Diluted)870.00M

Key Highlights

  • 1Consolidated revenue increased 10.3% to $17.113 billion, driven by strong demand across all segments.
  • 2Diluted Earnings Per Share (EPS) grew 16.5% to $1.55, benefiting from a lower effective tax rate due to the Tax Cuts and Jobs Act.
  • 3Operating profit decreased 6.0% to $1.520 billion due to increased operating expenses, including higher compensation, fuel, and purchased transportation costs.
  • 4U.S. Domestic Package segment operating profit declined 20.4%, impacted by adverse weather, investments, and higher pension expenses.
  • 5International Package and Supply Chain & Freight segments showed strong revenue growth and maintained healthy operating margins.
  • 6Capital expenditures were significant at $1.537 billion, reflecting ongoing investments in fleet, facilities, and technology.
  • 7The company returned capital to shareholders through $754 million in dividend payments and $261 million in share repurchases.

Frequently Asked Questions

The primary driver for the revenue increase was strong demand across all segments, particularly in International Package and Supply Chain & Freight operations, supported by growth in e-commerce and various industry verticals.

Operating profit decreased due to a significant increase in operating expenses. This was driven by factors such as unfavorable weather conditions impacting U.S. operations, increased investments in new facilities and technology, higher fuel costs, and elevated compensation and benefits expenses.

The Tax Cuts and Jobs Act significantly reduced the U.S. federal corporate income tax rate from 35% to 21%, leading to a lower effective tax rate for UPS in Q1 2018 (19.0% compared to 31.8% in Q1 2017) and contributing to higher net income and EPS.

UPS invested $1.537 billion in capital expenditures, focusing on key areas like acquiring new aircraft (Boeing 747-8F and 767-300 cargo aircraft), enhancing facility automation and capacity, and advancing its Smart Logistics Network through technology upgrades.