United Parcel Service Inc. (UPS, Financial) released its fourth-quarter 2020 results before the market opened on Feb. 2. The delivery giant posted higher-than-anticipated earnings and revenue owing to an increase in domestic and international deliveries in the wake of the Covid-19 pandemic.
The company recorded strong holiday sales as the pandemic boosted online shopping. Given that the holiday shipments were larger, the company applied additional surcharges.
Shares surged 3.35% to $161.50 in premarket trading on Tuesday following the results.
Key metrics
The Atlanta-based delivery and logistics company posted adjusted earnings of $2.66 per share, which were up from $2.11 in the prior-year quarter. Revenue for the same period came in at $24.9 billion, up 21% on a year-over-year basis. Analysts had anticipated earnings of $2.11 per share on $22.79 billion in revenue.
Reflecting on the quarter, CEO Carol Tome said:
"Our financial performance in the fourth quarter exceeded our expectations, and I thank all UPSers for their extraordinary efforts to deliver industry-leading service through the holidays. I'd also like to thank our customers who worked with us during this challenging year. As we look past 2020 into the new year, we are optimistic. During the fourth quarter, we began transporting COVID-19 vaccines and we stand ready to deliver hope and health to people around the world."
Segment results
In the U.S., revenue surged 17.4% to $15.75 billion. The growth was attributable to a rise in online orders on account of the pandemic. The segment's operating profit amounted to $1.25 billion, up from $1.07 billion reported in the year-ago quarter. In addition, average daily package volume jumped about 10%. Thanks to these headwinds, the operating margin rose to roughly 8% in the reported quarter.
The international segment saw revenue increase 23.3% to $4.77 billion. Likewise, operating earnings stood at $1.15 billion in the fourth quarter, which was an improvement from $799 million reported a year ago. Average daily package volume inched up 21.9% on a year-over-year basis courtesy of export growth from all regions.
Residential shipments rise while commercial shipments decline
The coronavirus pandemic and the resulting lockdowns forced customers to stay at home and shop online, which is why resident shipments surged during the quarter. However, business-to-consumer shipments are less lucrative for UPS when compared with business-to-business shipments, which involves comparatively less miles per route and more packages per stop.
Currently, the shipping giant is focusing on reducing costs associated with residential delivery.Going forward, the company expects the commercial business to rebound when the effects of the pandemic begin to ease, which will help boost commercial deliveries.
Guidance
UPS pulled its financial forecast for full-year 2021, citing the global uncertainty caused by the coronavirus pandemic. The company, however, foresees capital spending of $4 billion.
Disclosure: I do not hold any positions in the stocks mentioned.
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