United Parcel Service, Inc. (NYSE: UPS – $107.82) reported profit rose 3.2% in the latest period, though higher fuel costs cut into revenue from its U.S. and international package deliveries. Oil prices rose during the latest quarter, and UPS said lower fuel surcharges in the quarter hurt results. The company’s fuel surcharges are typically tacked onto shipments to cover that cost, but they lag rising fuel prices by a couple of months. Revenue rose 2.4% in the U.S. package segment and 1.1% in the international package segment. Average daily shipments in the U.S. increased 2.5%, helped in part by solid performance in its next-day air service. Supply chain and freight revenue increased 13%, helped by last year’s acquisition of Coyote Logistics.
Over all for the June period, UPS posted earnings of $1.27 billion, or $1.43 a share, up 6% compared to the year earlier’ s $1.35 a share, partly helped by a lower share count. Total revenue increased 3.8% to $14.63 billion. On a currency-neutral basis, revenue rose 4%. Both earnings per share and revenue were in line with analysts’ estimates.
UPS, the world’s largest package delivery provider, has been trying to make e-commerce as profitable as its traditional business-to-business deliveries. It posted some success in the first quarter as it sought to increase profitability by investing in software to improve delivery routes, among other changes. Looking ahead, the company reiterated its full-year 2016 earnings per share guidance of $5.70-$5.90 based on expectations for continued momentum. The shares, yielding 2.8%, have worthwhile total return potential looking out to late decade.