UPS Profit Tops Estimates as Revenue Rises; Confirms Guidance
United Parcel Service Inc. (NYSE: UPS – $106.30) reported a higher quarterly net profit as revenue grew across its domestic, international and supply chain and freight segments. The Atlanta-based company posted first-quarter net income of $1.158 billion, or $1.32 per share, up 2.4% from $1.27 per share a year earlier. Analysts, on average, expected earnings per share of $1.29. Revenue rose to $15.3 billion vs. $14.4 billion a year ago and somewhat better than Street views. Revenue at the company’s domestic segment rose 5% percent, with the company saying e-commerce demand was strong. International revenue moved higher from $2.9 billion to $3.96 billion. Although UPS embraced the new Presidential Administration’s agenda, I believe the company is still vulnerable to potential changes in U.S. trade policy. The smaller Supply Chain and Freight Segment showed a 13% year-on-year gain. Like other package delivery companies, UPS has benefited from a rapid rise in e-commerce, but has struggled to bring down the extra costs associated with making stops at individual residences rather than at businesses.
Earlier this week, UPS was awarded a five-year $2.35 billion indefinite-delivery/indefinite-quantity, fixed-price next generation delivery service contract from the Department of Defense U.S. Transportation Command. The contract provides express small package delivery services for international shipments and express and ground small package delivery services for domestic shipments.
UPS still expects full-year earnings per share between $5.80 and $6.10 as compared to last year’s $5.82. The shares may continue to interest conservative, long-term investors, and the current yield of 3.1% enhances total return potential.