E-commerce growth fuels package volume increase at UPS
UPS reported second quarter results that were below the company's expectations as a result of disappointing performance in freight forwarding and a "slight miss" in International package.
The company had total revenues of $13.5 billion for the quarter, an increase of 1.2% from $13.35 billion for the same period last year. U.S. domestic second quarter revenue improved to $8.24 billion, up 2.3%. Operating profit was relatively flat compared to last year. Daily package volume improved 1.9% compared to the same period last year, driven by residential shipments from e-commerce customers.
International daily package volume improved 5% and revenue increased 1.6% to $3.06 billion. Daily export shipments increased 5 %, with Europe and Asia leading the way. Non-U.S. Domestic volume was up 5.1% compared to the prior year period.
"Market conditions and shipper preferences clearly impacted our freight forwarding and International business," said Scott Davis, UPS's chairman and CEO. "UPS is adapting to these conditions to ensure we deliver a solid second half."
Revenue in the supply chain and freight segment was $2.20 billion, down 3.2%. Operating profit dropped to $159 million with an operating margin of 7.2%. The revenue and operating profit declines were primarily due to the Forwarding business unit, which remained under pressure as tonnage declined. Additionally< yields were negatively impacted by lower demand in trans-Pacific trade lanes. Lower operating costs could not offset these headwinds.
UPS Freight revenue improved; however, operating profit and margin declined slightly, due to increases in compensation and benefit expense.
"Going forward, UPS is focused both on our long-term strategy and adapting to changing market conditions. Looking toward the back half of the year, although global economic expectations have been lowered, UPS expects growth in adjusted diluted earnings per share of 4-13% over the same period last year," said Kurt Kuehn, UPS CFO.