UPS Delivers Another Quarter of Impressive Growth
One of the largest package delivery companies in the world, United Parcel Service (UPS) recently delivered another quarter of impressive growth. Revenue rose 8.6 percent to over $17.9 billion in the third quarter of 2019, and adjusted earnings per share rose by 10.4 percent to $1.87 per share. Not only that, but this quarterly performance surpassed analyst expectations. Both domestic and international package revenue increased and free cash flow was strong.
Revenue growth was driven by higher daily shipments of ground packages and an increase in premium services such as Express Critical and International Express shipments. UPS customers continued to rely on their services for heavier, bulkier and time-critical items. In addition, the company’s income from operations grew 11.3 percent year-over-year to reach $3.3 billion in the same quarter.
One of the primary reasons for UPS’s success is its efficient related-party services. The company’s average daily volume (ADV) of its related-party services increased 8.2 percent compared to the same quarter of 2018. Related-party services include UPS Supply Chain Solutions, which is a provider of strategic services such as fulfillment and distribution. In addition, UPS’s Reusable Packaging and Return Solutions, which allows customers to return items through UPS Store locations, also contributed to the company’s success.
Strong growth was seen across the company’s network segments. Average daily volume for U.S. Domestic Packages increased by 6.6 percent from the third quarter of 2018. This was driven by higher daily shipments of ground packages and an increase in premium services such as Express Critical and International Express shipments. In addition, U.S. Domestic Package profitability improved significantly as compared to the same quarter of 2018, in part due to increases in average daily volume.
UPS’s international segments also saw impressive performance. Average daily volume for International Packages increased by 8.7 percent. This was due to improved trade lane performance, particularly for European origin shipments. Revenue for International Packages rose by 11.0 percent, which was a function of increased pricing and positive volume contributions. In addition, International Packages’ income from operations rose 18.7 percent mainly driven by the improved operating margin.
Finally, UPS’s free cash flow increased by 11.6 percent to $2.7 billion. This was due to an increase in operating cash flow, largely driven by better-than-expected collections and improved cash flow from working capital. In addition, this increase in free cash flow was supported by additional proceeds from divestment activities.
All told, UPS delivered another quarter of impressive growth in the third quarter of 2019. This success was driven by higher daily shipments of ground packages, an increase in premium services, improved trade lane performance, increased pricing, and improved cash flow from working capital. Looking ahead, the company remains confident that its network and service offerings, combined with its financial strength, will allow it to continue to deliver value and success to customers, employees, and shareholders alike.
