10-QPeriod: Q2 FY2019

UNITED PARCEL SERVICE INC Quarterly Report for Q2 Ended Jun 30, 2019

Filed July 30, 2019For Securities:UPS

Summary

United Parcel Service, Inc. (UPS) reported its financial results for the quarter and six months ended June 30, 2019. For the second quarter, consolidated revenue increased by 3.4% year-over-year to $18.048 billion, driven by growth in its U.S. Domestic Package segment. Operating profit saw a significant increase of 20.9% to $2.143 billion, with improved margins. Net income rose by 13.5% to $1.685 billion, and diluted earnings per share (EPS) grew by 13.5% to $1.94. On a year-to-date basis, consolidated revenue increased by 1.8% to $35.208 billion, but net income and diluted EPS saw slight decreases of 1.2% and 0.9% respectively, to $2.796 billion and $3.22. This year-to-date performance was impacted by lower investment and other income, and changes in the effective tax rate. The company highlighted strong volume growth in its U.S. Domestic Package segment, particularly in air services, driven by e-commerce demand. The International Package and Supply Chain & Freight segments experienced revenue declines, partly due to global trade uncertainties and currency impacts, though operating profits improved for both year-to-date.

Financial Highlights

54 data points
Beta

Revenue

$18.05B

Net Income

$1.69B

9.3% Net Margin

EPS (Diluted)

$1.94

Total Assets

$52.79B

Cash & Equivalents

$4.22B

Free Cash Flow

$583.00M

Financial Statements
Beta
Revenue$18.05B
Operating Expenses$15.90B
Operating Income$2.14B
Interest Expense$159.00M
Net Income$1.69B
EPS (Basic)$1.95
EPS (Diluted)$1.94
Shares Outstanding (Basic)865.00M
Shares Outstanding (Diluted)869.00M

Key Highlights

  • 1Consolidated revenue increased by 3.4% to $18.048 billion in Q2 2019, driven by U.S. Domestic Package segment growth.
  • 2Operating profit saw a significant increase of 20.9% to $2.143 billion in Q2 2019, with operating margin improving to 11.9% from 10.2% in the prior year.
  • 3Net income for Q2 2019 rose by 13.5% to $1.685 billion, translating to a diluted EPS of $1.94, up 13.5% year-over-year.
  • 4U.S. Domestic Package segment showed robust growth with a 7.7% revenue increase, led by strong volume in Next Day Air and Deferred services.
  • 5International Package segment revenue decreased by 2.7% to $3.505 billion, impacted by declining volumes and currency headwinds.
  • 6Supply Chain & Freight segment revenue declined by 3.1% to $3.393 billion, primarily due to lower forwarding volumes amid global trade uncertainties.
  • 7The company's transformation strategy costs were $21 million in Q2 2019, down from $263 million in Q2 2018, positively impacting year-over-year comparisons of adjusted results.

Frequently Asked Questions

The primary driver of revenue growth in the second quarter of 2019 was the U.S. Domestic Package segment, which saw a 7.7% increase in revenue, fueled by strong volume growth in air services, particularly Next Day Air and Deferred, driven by e-commerce demand.

The company's transformation strategy incurred pre-tax charges of $21 million in the second quarter of 2019, a significant decrease from $263 million in the same period of 2018. This reduction in transformation costs contributed to the year-over-year improvement in adjusted operating profit and net income.

Both the International Package and Supply Chain & Freight segments experienced revenue declines in the second quarter of 2019. The International Package segment was affected by lower volumes and currency impacts, while the Supply Chain & Freight segment saw reduced forwarding volumes due to global trade uncertainties and capacity surplus in truckload brokerage. Despite revenue declines, operating profit for both segments saw improvements, indicating effective cost management and yield initiatives.

The company reported a decrease in net cash from operating activities for the six months ended June 30, 2019, largely due to lower income tax receipts and higher pension contributions. However, the company stated its current cash position, access to capital markets, and operating cash flows are expected to be adequate for its operational needs, capital expenditures, transformation strategy, dividends, and share repurchases.