Takeaways from the Q2-2019 UPS Inc. Earnings Call

  • Revenue for 2nd Quarter rose 3.4% to $18.05 Billion.
  • Total Operating Profit grew 6.3% with growth in all segments.
  • Net Income was $1.7 Billion.
  • Operating Margin increased 170 basis points to 8.17%.
  • Average Daily Volume was up more than 7%.
  • Next Day volumes were up more than 30%.
  • They reiterated and emphasized the new changes taking place from their announcement on July 24:
    • UPS My Choice for Business
    • Extended Pickup Hours
    • 7 Day Pickup & Delivery
    • Additional Access Points
    • Worldwide Economy
    • UPS Flight Forward

US Domestic Segment

  • Significant volume growth in all products, led by more than 30% growth in UPS Next Day Air volume. This increase in demand was driven by accelerated delivery requirements from e-commerce shippers.
  • In anticipation of more Air volume, due mostly to e-commerce growth, UPS will add 11 new aircraft by end of year.
  • They’ve also opened 3 major automated hubs which add more than 2 million square feet.
  • Highlights:
    • Next Day Air volume up more than 30%
    • Ground volume grew over 4%
    • Ground Residential growth of 13%
    • Ground revenue increase more than 5%
    • Total US Revenue was up 7.7% to $796 Million
    • Total US Operating Profit grew 8%
    • Total US Operating Margin was 11%
    • Decline in unit cost growth

International Segment

  • Experienced a challenging environment due to trade with China and European uncertainty with regards to Brexit.
  • Volume was down.
  • Highlights:
    • Total Revenue per piece was down less than 1%
    • International domestic revenue per piece rose 0.3% led mostly by Intra-Europe
    • Total Operating Profit was $665 Million
    • Total Revenue was $3.5 Billion

Supply Chain & Freight Segment

  • International Air Freight saw profit growth on lower tonnage.
  • Soft demand on the China & US lane.
  • Expanded on the buy-sell spread.
  • Total revenue was down driven by the overall market rates, but profit increased significantly, and operating margins expanded.
  • Highlights:
    • Operating Margin grew to 8%
    • 3.9% increase in revenue per LTL hundredweight