UPS reports lower profit despite increased volumes

Company says it will “take actions necessary to improve profitability by increasing operational efficiency and adjusting price where appropriate.”    UPS had profits of $453 million in the fourth quarter of 2014 compared to $1.2 billion in the same 2013 period, according to the latest earnings statement from the company.
   Revenue was $15.9 billion in the fourth quarter 2014 compared to 15 billion in the fourth quarter of 2013.
   UPS reported operating results in the U.S. domestic segment were negatively impacted by higher than expected peak related expenses.
   “UPS customers were delighted with the high quality service we delivered during the holiday season,” said David Abney, UPS chief executive officer. “However, the financial results were below our expectations.
   “As we move into 2015, we will address this disparity with both cost and revenue actions,” Abney added. “We will take actions necessary to improve profitability by increasing operational efficiency and adjusting price where appropriate. Our growth strategy is sound and we reaffirm our long-term target of 9 percent to 13 percent earnings per share growth.”
   UPS delivered 1.3 billion packages during the fourth quarter of 2014, an increase of 8.1 percent over the same period last year. For the full calendar year, the company completed delivery of 4.6 billion packages, up 6.8 percent from 2013.
   The company said:

• U.S. domestic fourth quarter revenue was $10 billion, up 7.5 percent over the fourth quarter in 2013. Daily package volume increased 6.6 percent with Deferred Air and Ground up 11 percent and 7.1 percent, respectively.
• International Package fourth quarter revenue was $3.4 billion, a 1.6 percent increase. Daily package volume increased 4.3 percent. Export shipments were up 5.2 percent per day, driven primarily by an 8.5 percent growth from Europe and offset somewhat by a decline in Asia export volume. Non-U.S. domestic products were up 3.6 percent with strong growth in Canada, Spain and Mexico.
• Supply Chain and Freight revenue was $2.5 billion in the fourth quarter, a 7.4 percent increase over the same period in 2013. The company said adjusted operating profit in the segment increased 4.7 percent to $179 million as improvements in distribution and UPS Freight were offset by declines in the forwarding unit.

   The company said operating profit for forwarding was lower, as results in North American air freight and ocean were offset by challenges in international air freight.
   It said distribution revenues increased at a mid-teens growth rate, as demand from retail and healthcare customers remained strong. Operating profit expanded over the prior year results.
   “This year will be one of continuous improvement and advances in strategic initiatives that have great potential for the company,” said Kurt Kuehn, UPS chief financial officer. “E-commerce growth, operations technology implementation, emerging market expansion and industry specific solutions will provide momentum for UPS as we move throughout the year.
   “The company expects growth across all business units,” Kuehn continued. “We anticipate full-year 2015 diluted earnings per share of $5.05 to $5.30, a 6 percent to 12 percent increase over our 2014 adjusted results.”