10-QPeriod: Q3 FY2018

UNITED PARCEL SERVICE INC Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 30, 2018For Securities:UPS

Summary

United Parcel Service (UPS) reported strong revenue growth for the third quarter and the first nine months of 2018, driven by increases in average revenue per piece across its segments and solid volume growth, particularly in U.S. Domestic Package operations. Despite a 9.4% increase in consolidated operating expenses, largely due to transformation strategy costs, higher fuel prices, and increased compensation and benefits, the company managed to increase net income by 19.8% in the third quarter and 13.9% year-to-date, leading to improved diluted earnings per share. The company is actively managing its capital structure, including share repurchases and dividend payments, and is investing in its 'smart global logistics network' and transformation strategy, which are expected to yield benefits in future periods.

Financial Highlights

54 data points
Beta

Revenue

$17.44B

Net Income

$1.51B

8.6% Net Margin

EPS (Diluted)

$1.73

Total Assets

$46.69B

Cash & Equivalents

$4.10B

Free Cash Flow

$581.00M

Financial Statements
Beta
Revenue$17.44B
Operating Expenses$15.72B
Operating Income$1.73B
Interest Expense$155.00M
Net Income$1.51B
EPS (Basic)$1.74
EPS (Diluted)$1.73
Shares Outstanding (Basic)865.00M
Shares Outstanding (Diluted)870.00M

Key Highlights

  • 1Consolidated revenue increased by 7.9% to $17.444 billion in Q3 2018 and by 9.2% to $52.013 billion year-to-date, driven by strong performance across all segments.
  • 2Net income rose by 19.8% to $1.508 billion in Q3 2018 and by 13.9% to $4.338 billion year-to-date, with diluted EPS increasing to $1.73 and $4.99 respectively.
  • 3U.S. Domestic Package segment revenue grew 8.1% in Q3, driven by an 4.8% increase in average revenue per piece and a 3.3% rise in average daily package volume.
  • 4International Package segment revenue increased 3.0% in Q3, despite a slight decrease in volume, due to a 3.0% rise in average revenue per piece, though impacted by currency fluctuations.
  • 5Supply Chain & Freight segment revenue saw robust growth of 12.2% in Q3, fueled by strong performance in Forwarding and Freight operations.
  • 6Operating expenses increased by 9.4% in Q3, significantly impacted by $97 million in transformation strategy costs, higher fuel prices, and increased compensation and benefits.
  • 7The company returned $770 million to shareholders through share repurchases and paid $2.26 billion in dividends year-to-date in 2018.

Frequently Asked Questions

UPS demonstrated strong revenue growth, with consolidated revenue increasing by 7.9% to $17.444 billion in the third quarter and by 9.2% to $52.013 billion year-to-date. Net income also saw significant increases, rising by 19.8% to $1.508 billion in the third quarter and by 13.9% to $4.338 billion year-to-date. This translated into improved diluted earnings per share of $1.73 for the quarter and $4.99 year-to-date.

Revenue growth was broad-based. The U.S. Domestic Package segment benefited from higher average revenue per piece and increased package volume. The International Package segment saw revenue growth driven by higher average revenue per piece, offsetting a slight volume decrease, and was influenced by currency impacts. The Supply Chain & Freight segment experienced robust growth, particularly in its Forwarding and Freight operations.

Operating expenses increased by 9.4% in the third quarter, largely due to $97 million in transformation strategy costs, higher fuel prices contributing to increased fuel expense, and higher compensation and benefits costs. These factors, along with investments in the company's 'smart global logistics network,' put pressure on operating margins, despite revenue growth. The company is undertaking a multi-year transformation strategy expected to drive future efficiencies.

UPS continues to actively manage its capital. Year-to-date in 2018, the company repurchased $770 million of its stock and paid $2.26 billion in dividends. It also has an $8.0 billion share repurchase authorization with $3.583 billion remaining as of September 30, 2018, indicating a continued commitment to shareholder returns.