United Parcel Service (NYSE: UPS – $106.43), the world’s largest package delivery service, announced first-quarter earnings per share of $1.27, a 13% increase over the same period last year. Total revenue was $14.4 billion, up 3.2% from a year ago. Revenue growth, however, was slowed by lower fuel surcharges and currency exchange rates. But analysts had expected earnings of just $1.22 a share on revenue of $14.57 billion. The company’s record first quarter results were driven by both the U.S. Domestic and International small package segments. On a currency-neutral basis, international revenue increased 3.7% and operating profits increased 15% to $574 million. International operating profit jumped more than 15% to $574 million, although revenue was down 1.9% factoring in exchange rates. In the U.S. operating margins expanded on solid revenue growth and reduced per unit costs from productivity gains. U.S. Domestic operating profit increased 7.6% to $1.1 billion and revenue increased 3.1% over the first quarter of 2015, to $9.1 billion. Supply Chain and Freight revenue increased by more than 10% to $2.4 billion. This was mainly due to the acquisition of Coyote Logistics in the third quarter of last year. The company went on to say that revenue management actions and improved network efficiencies are driving substantial operating profit growth.
UPS expects this momentum to continue and therefore reaffirmed guidance for full-year earnings per share of $5.70 to $5.90, an increase of 5% to 9% over adjusted 2015 results. The company’s guidance is solid. Earnings per share for 2016 are expected to grow 5.0%-8.6% year over year and Street views of $6.24 per share for 2017 are reasonable. The wide range for 2016 reflects the company’s uncertainty over global economic conditions. Barring any further strengthening in the dollar and weakness in UPS’ far-reaching international businesses, the shares remain a solid conservative holding.