Atlanta-based global freight transportation and logistics bellwether UPS announced very strong first quarter earnings results earlier today.
Quarterly revenue—$22.9 billion—headed up 27% annually, and adjusted earnings per share—at $2.77—climbed 141% annually and was nearly a full dollar ahead of Wall Street expectations, at $1.72. Consolidated quarterly operating profit increased 158%, to $2.8 billion.
“I want to thank all UPSers for delivering what matters, including COVID-19 vaccines,” said Carol Tomé, UPS chief executive officer, in a statement. “During the quarter, we continued to execute our strategy under the better not bigger framework, which enabled us to win the best opportunities in the market and drove record financial results.”
Individual segment results for Q4:
- U.S. domestic package revenue headed up 22.3%, to $14.010 billion, paced by growth from small and medium-sized businesses, and average daily volume rose 12.8%, to 20.352 million daily packages, with UPS attributing those gains to growth from small- and medium-sized businesses, and total average revenue per package up 10.2% at $10.93;
- International Package revenue, at $4.607 billion, was up 36.2%, paced by activity in Asia and Europe, with average daily volume up 23.1%, with export growth from all regions, to 3.793 million packages per day, and total revenue per package up 12.3% to $18.50, with UPS noting that this was driven by export growth from all regions; and
- Supply Chain & Freight revenue, at $4.291 billion, rose 34.3%, with UPS pointing to strong market demand in nearly all businesses, including freight forwarding out of Asia and also UPS Healthcare
On the company’s earnings call earlier today, CEO Tomé said that the ongoing COVID-19 pandemic has driven tremendous change to how we all live and conduct business.
“Our results exceeded our expectations, driven by an improving macro environment and great execution by our team,” she said. “All of our business segments delivered strong performance in the first quarter. We recorded record profits and a double-digit operating margin in our U.S. domestic segment, record first quarter profit in our international segment, and record operating profit and operating margins in Supply Chain & Freight.”
Tomé also highlighted UPS’s Customer First, People Led, Innovation Driven Strategy, which is focused on building capabilities that matter the most to customers and using those capabilities to capture the best opportunities in the market, like SMB and healthcare.
And she explained that in the U.S. the enhancements UPS has made last year and this year to speed up its Ground network and enhance its Digital Access Program (DAP) and expand weekend operations are taking hold, with the company adding nearly 150,000 new DAP accounts in the first quarter and remaining on track to hit its $1 billion revenue DAP target by the end of 2021.
What’s more, she said that total average U.S. daily volume growth for SMB, including its platform businesses, reached an all-time high of 35.6%, outpacing the growth rate of its larger customers for the third consecutive quarter.
“This mix improvement and certain other revenue quality actions are delivering results, with U.S. Domestic revenue per piece up 10.2% in the first quarter,” she said. “Looking at our International segment, we were able to be elevated customer demand by leveraging the ability of our network. Export volume grew double-digits in all regions…and SMB average daily volume was up 23%. Our Supply Chain & Freight segment responded well to market demand, and we are on track to complete the divestiture of our UPS Freight business by the end of this month, and we look forward to our new commercial relationship with TFI.”
UPS CFO Brian Newman said on the earnings call that UPS was extremely pleased with its revenue quality efforts over the course of the quarter, which were driven by strong SMB average daily volume growth and demand-related surcharges.
“As a result of our actions, reported revenue per piece grew 10.2% year-over-year, with Ground revenue per piece up 12.5%,” he said.
Addressing the 2021 outlook, Newman said UPS recognizes there is still uncertainty ahead related to the pandemic and other factors that could interrupt the recovery, adding the UPS is not providing revenue or EPS guidance at this time.
Analyst takes: Jerry Hempstead, president of Orlando-based Hempstead Consulting, said that UPS hit it out of the park in the first quarter.
“Covid has turned out to be [a game changer] for them,” he explained. “Buying behavior has changed behavior forever. Unfortunately for shippers this has and will continue to fuel UPS in its ability to increase pricing due to the spectacular demand for the service. I expect some arrogance and hubris on its part, which most likely will infect the attitude at FedEx as well. Shippers need to be investigating alternatives now and not in the fourth quarter.”
And Chase Flashman, CEO and co-founder of Indianapolis-based ShipSights, noted that this first quarter performance reflects how Tomé’s track record of making money continues.
“This is a trend that I see continuing,” he said. She is making a ‘leaner and meaner’ UPS that is going to continue generating profitable revenue.”