UPS Meets Earning’s Estimates on Higher Revenue; Maintains Guidance
The world’s largest package delivery provider, United Parcel Service Inc. (NYSE: UPS – $107.01) reported that revenue rose above expectations in its latest quarter as domestic deliveries grew, though it pulled in less revenue from fuel surcharges on the packages it ships denting revenue growth by 50 basis points. Still, revenue rose 4.8% in the U.S. package segment and 2.2% in the internationally, totaling $14.93 billion and better than Street estimates of $14.73 billion. Earnings inched up to $1.27 billion, or $1.44 a share, compared with $1.39 a year earlier and was in line with analysts’ expectations. The per-share figure was helped by a lower share count in the latest period. Supply chain and freight revenue grew 8.1%, helped by last year’s acquisition of Coyote Logistics. During the quarter, UPS said average daily shipments in the U.S. increased 5.7%, driven by e-commerce in the company’s continued efforts in making the business as profitable as its traditional business-to-business deliveries. Deferred air shipments, meanwhile, climbed 10% and next-day air gained 5.9%.
The company maintained its adjusted earnings guidance for full-year 2016 at $5.70 to $5.90 per share, straddling the $5.81 consensus. Next year’s estimates by analysts are in the $6.00 – $6.20 per share range. Separately, UPS said it is planning for “record seasonal global delivery volume,” up more than 14% above the peak delivery period last year. The company said it is benefiting from two additional delivery days during 2016. It expects to surpass 700 million packages delivered globally in 25 days between Thanksgiving and New Year’s Eve. A weaker U.S. dollar and/or improved global GDP growth prospects would likely benefit the shares somewhat, but I am not very optimistic either of these events are likely. However, a rock-solid business model and decent dividend – yielding of 2.9% – make holdings in UPS attractive from a defensive standpoint.