The Atlanta-based delivery giant, United Parcel Service (UPS, Financial), posted its first quarter results for the fiscal year 2015 yesterday before the bell, and sent the stock higher in pre-market trading soon after the earnings report was declared. The earnings clearly surpassed the Street estimates, though currency woes led to the revenue falling shy of expectations. The UPS stock was up 3% in midday trading at $100.59. Let’s quickly catch up with the quarter highlights that were shared during the earnings conference on April 28.
Revenue and earnings growth triggers
In January, the delivery giant raised prices and changed the way of charging for packages to be based on the box size instead of the box weight. This was in order to get e-retailers to either use smaller boxes that would require less space in a truck, or to make them pay higher prices. The company has said several times in the past that a dimensional weight pricing technique was being implemented to reduce its operational expenses.Ă‚
In addition, the company has increased the fuel surcharge to promote e-commerce profitability. Revenue for the U.S. ground package segment has grown 5.3% to $6.36 billion with the increased growth in the business-to-business shipments. The domestic package segment saw a 3.8% climb in revenue at $8.8 billion, with daily package volume being up 2.4% at $14.768 million and deferred air and ground showing 12.3% and 2% improvement, respectively. However, revenue for the quarter grew only 1.4% to $13.98 billion, which was below the analysts’ consensus of $14.27 billion.
UPS delivered 1.1 billion packages in the first quarter of 2015, which was a 2.8% growth from the year earlier. This growth was driven by the 9.4% improvement in the European exports. International revenue showed increase of 2.4% from a year earlier, to $3 billion in the first quarter.
Earnings rise, future outlook remains unchanged
Though the revenue failed to meet the analysts’ forecast, the shares of the company clocked into the positive territory during pre-market trading on this Tuesday as the bottom line beat the analysts’ expectations. Earning beat was by around three cents a share, with earnings per share at $1.12 per share on an adjusted basis. UPS has reported net income of over $1.03 billion during the quarter.
The operating profit from international locations was up 14% to $498 million during the quarter. In the U.S., operating profit improved 11% year-over-year to $1 billion. During the earnings call, CFO Kurt Kuehn, said –“Solid performance across all three business segments was led by positive momentum in International, gains from revenue management and productivity improvements in the U.S…” He also reiterated that the full-year earnings guidance would be between $5.05-$5.30 a share, while analysts have estimated the full-year EPS at $5.15 a share.
Final word
It seems that UPS is slowly reviving from the sales plunge that it had encountered during the holiday season, and that is well reflected in the continued strength in generating free cash flow which came at $2.4 billion for the quarter. Pricing seems to have generated the positive vibes for the company that has further expansion plans in Europe for the next five years. It’s already investing almost $2 billion over the coming five years in Europe as the company moves ahead to add more capacity in the market. Surely, in the upcoming quarters, the revenue will climb further, and so would the profits. So, let’s stay tuned.
