10-QPeriod: Q3 FY2020

UNITED PARCEL SERVICE INC Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 2, 2020For Securities:UPS

Summary

United Parcel Service (UPS) reported a strong third quarter of 2020, with significant revenue growth driven by the surge in e-commerce and business-to-consumer (B2C) shipments. Total revenue increased by 15.9% year-over-year, reaching $21.2 billion, and average daily package volume saw a robust 13.5% increase. This growth was particularly evident in the U.S. Domestic Package segment, which benefited from increased residential deliveries and network optimization efforts. Despite higher operating expenses, largely due to increased compensation, benefits, and purchased transportation costs associated with higher volumes and reduced delivery density, UPS managed to increase its operating profit by 11.0% to $2.4 billion. Net income rose by 11.8% to $2.0 billion, translating to diluted earnings per share of $2.24. The company also reported a significant increase in net cash from operating activities, reaching $9.3 billion year-to-date. UPS continues to navigate the ongoing impacts of the COVID-19 pandemic, noting a shift in demand mix and potential future impacts on credit losses and asset impairments.

Financial Highlights

54 data points
Beta

Revenue

$21.24B

Net Income

$1.96B

9.2% Net Margin

EPS (Diluted)

$2.24

Total Assets

$62.41B

Cash & Equivalents

$8.84B

Free Cash Flow

$2.18B

Financial Statements
Beta
Revenue$21.24B
Operating Expenses$18.88B
Operating Income$2.36B
Interest Expense$176.00M
Net Income$1.96B
EPS (Basic)$2.25
EPS (Diluted)$2.24
Shares Outstanding (Basic)868.00M
Shares Outstanding (Diluted)872.00M

Key Highlights

  • 1Total revenue for Q3 2020 increased by 15.9% to $21.2 billion, driven by strong B2C demand and e-commerce growth.
  • 2Average daily package volume increased by 13.5% to 23.9 million packages, reflecting higher residential deliveries, particularly in the U.S. Domestic segment.
  • 3Operating profit rose 11.0% to $2.4 billion, demonstrating effective cost management despite increased operating expenses.
  • 4Net income grew by 11.8% to $2.0 billion, with diluted EPS reaching $2.24, up from $2.01 in the prior year.
  • 5Net cash from operating activities significantly increased to $9.3 billion for the nine months ended September 30, 2020.
  • 6The company suspended its share repurchase program in April 2020, but maintained its quarterly cash dividend.
  • 7International Package segment showed strong revenue and operating profit growth, driven by outbound demand from Asia and e-commerce in Europe.

Frequently Asked Questions

The COVID-19 pandemic significantly influenced UPS's Q3 2020 results by accelerating the shift towards e-commerce and increasing business-to-consumer (B2C) shipments. While this led to higher package volumes and revenue, it also resulted in increased operating expenses due to lower delivery density and higher compensation and benefit costs. B2B activity remained depressed.

The U.S. Domestic Package segment experienced strong revenue growth driven by increased residential demand and network optimization. However, lower delivery density associated with a higher mix of residential deliveries is compressing operating margins. UPS anticipates this trend will continue and is focused on optimizing network efficiency and adjusting pricing to mitigate margin pressure.

During the nine months ended September 30, 2020, UPS issued approximately $3.5 billion in fixed-rate senior notes and managed its commercial paper program. The company announced a suspension of its share repurchase program in April 2020 due to economic uncertainty, though it continued to pay regular cash dividends.

The International Package segment reported strong revenue growth, up 17.0% in Q3 2020, driven by robust outbound volume from Asia and e-commerce growth in Europe. The segment also saw a significant increase in operating profit and expanded its operating margin, indicating strong performance in international markets.