UPS profits slip in Q3 despite rising revenues

The Atlanta-based parcel giant reported increased revenues in all of its business segments, but net income still fell 0.5 percent from the same period in 2016 due in part to the impacts of hurricanes Harvey and Irma in the U.S. Southeast.    UPS posted a net profit of 1.2 billion in the third quarter of 2017 on revenues of $15.9 billion, according to the company’s most recent financial statements.
   The Atlanta-based parcel giant’s third quarter net income slipped 0.5 percent from the same period in 2016, despite a 7 percent increase in revenues. Diluted earnings per share (EPS) rose 0.7 percent to $1.45 per share for the quarter.
   Revenues increased in all segments and major product categories, UPS said, as expanded customer demand spread across the company’s portfolio. Operating profits came to $2 billion, driven by strong performance in its Supply Chain and Freight segment, which saw revenues and operating profits jump 13.4 percent and 9.7 percent, respectively.
   Year-to-date capital expenditures stood at $3.7 billion.
   UPS’s international operating profit rose 8 percent, as daily export volumes jumped 19 percent, marking third straight quarter of double-digit growth, the company noted. Furthermore, U.S. domestic revenues were up 3.9 percent due to higher package demand and yields. Next Day Air daily shipments were up 8 percent, in contrast with the company’s Deferred Air daily shipments, which were down slightly in comparison with the strong growth seen in last year’s third quarter results.
   In the Freight segment, UPS saw less-than-truckload (LTL) revenues grew 9.3 percent on tonnage growth of 5.5 percent, with LTL revenue per hundredweight up 3.6 percent from the third quarter of 2016. Increased customer demand from the retail and aerospace sectors were cited as the driving force behind the distribution unit’s revenue and operating profit increase.
   “UPS produced another solid quarter of financial performance, despite the impact of several natural disasters that slowed regional economic activity and damaged infrastructure,” said David Abney, UPS chairman and CEO. “Our business segments adapted quickly to changing conditions this quarter, taking advantage of market opportunities while minimizing cost and service disruptions from recent events.”
   UPS noted that it has paid dividends of nearly $2.1 billion, an increase of 6.4 percent per share over the prior year, “rewarding shareowners with continued strong dividend yield,” as well as repurchasing 12.3 million shares for approximately $1.4 billion.
   Through the first nine months of 2017, UPS has grown its net income 3.7 percent to $3.8 billion ($4.34 per diluted share) compared with the same 2016 period, on revenues that rose  7 percent year-over-year to $47 billion.
   “UPS third-quarter results highlight the flexibility of our business” said Richard Peretz, UPS chief financial officer. “Our recent performance gives us confidence moving forward as we adapt to evolving, global e-commerce strategies with increased seasonality. We are executing well on our plans, have a positive outlook for peak and as a result, we are moving higher in our original guidance range.”
   The company expects momentum to continue, with the focus remaining on delivery a successful peak season. Regarding peak season, UPS also announced another rate increase effective Dec, 24, 2017.
   The rates for UPS Ground, UPS Air and International services, as well as UPS Air Freight rates within and between the U.S., Canada and Puerto Rico, will increase an average net 4.9 percent, the company announced on Wednesday. A large package surcharge for any U.S. domestic package delivered to a residential address will be $90, effective in July 2018, while the additional handling surcharge for any U.S. Domestic package exceeding 70 pounds in actual weight will be $19.00, effective the same date, noted UPS
   “UPS continues to make investments in the speed, scope and coverage of our transportation network in order to support our customers’ growth and service needs,” the company said in a statement. “Rate increases support ongoing expansion and capabilities enhancements, while UPS maintains the high service levels customers expect.”