UPS increases Q1 net income, revenues

The Atlanta, Ga.-based parcel giant posted a net income of $1.1 billion for the first quarter of 2016 on revenues of $14.4 billion, year-over-year increases of 10.2 percent and 3.2 percent, respectively.    UPS saw net income surge 10.2 percent year-over-year for the first quarter of 2016 to $1.1 billion, according to the company’s most recent unaudited financial statements.
   The Atlanta, Ga.-based parcel giant saw earnings per share for the quarter rise 13 percent from the first quarter of 2015 to $1.27 per diluted share, which surpassed the $1.22 per share, projected by analysts polled from Thompson Reuters.
   UPS attributed record first quarter results to its U.S. Domestic and International small package segments.
   BB&T Capital Markets Analyst Kevin Sterling also noted UPS has been partially insulated from a slowdown in U.S. freight volumes due to a growing reliance on e-commerce.
   Meanwhile, revenues for the quarter totaled $14.4 billion, a 3.2 percent year-over-year increase. However, revenues fell short of consensus analyst estimates of $14.6 billion and UPS said revenues growth was hindered by lower fuel surcharges and currency exchange rates.
   The U.S. Domestic Package segment’s revenues totaled $9.1 billion for the quarter, a 3.1 percent increase from the first quarter of 2015. The segment’s average daily package volume inched up 2.8 percent year-over-year. “High demand from e-commerce shippers contributed to fast growth in business-to-consumer deliveries this quarter,” UPS said.
   Revenues in the International Package segment for the quarter, which were set back by lower fuel surcharges, dipped 1.9 percent from the first quarter of 2015 to $2.9 billion.
   Daily export shipments for the segment inched up slightly by 0.4 percent year-over-year, as growth out of Asia and Europe offset declines in U.S. exports. However, the segment’s daily import deliveries for the first quarter fell 3.8 percent from the first quarter of 2015.
   The Supply Chain and Freight Segment saw revenues for the quarter jump 10.4 percent year-over-year to $2.4 billion, primarily driven by the $1.8 billion acquisition of Coyote Logistics in the third quarter of 2015.
   “Revenue management actions and improved network efficiencies are driving substantial operating profit growth,” UPS Chief Financial Officer Richard Peretz said. “We expect this momentum to continue, and therefore reaffirm our guidance for 2016 full-year diluted earnings per share of $5.70 to $5.90, an increase of 5 percent to 9 percent over adjusted 2015 results.”
   Meanwhile, Robert W. Baird & Co. Analyst Ben Hartford projects that now that the busiest season has passed, UPS investors will probably focus on the potential risks posted by Amazon.com Inc., which has been moving towards creating its own distribution network.
   In March, Air Transport Services Group confirmed it established agreements with Amazon Fulfillment Services, an affiliate of Amazon.com, to operate an air-cargo network to serve the giant online retailer’s customers in the United States.
   However, in regards to suggestions that Amazon would be able to build a network to compete with FedEx and UPS, FedEx Chief Executive Fred Smith said on a conference call with analysts he does not view this move as a threat.
   “Concerns about industry disruption continue to be fueled by fantastical — and I chose this word carefully — articles and reports,” Smith said. “In all likelihood, the primary deliverers of e-commerce shipments for the foreseeable future will be UPS, the U.S. Postal Service and FedEx.”