UPS reports mixed results despite a healthy US domestic market

According to recently released Q3 figures, UPS appears to be having mixed fortunes in what has been, up to now, a reasonably healthy American domestic market. The company’s latest Q3 figures saw revenue edge downwards by 0.4% year-on-year to US$14.237bn but income before tax edge-up by 1.9% to US$1.905bn.

The picture at the level of the individual business was also rather mixed. The core US Domestic Package saw a 0.6% rise in volumes but behind this saw a 13.2% rise in ‘Deferred’ and a 4% rise in ‘Next Day’ Air products, yet in ‘Ground’ shipments were down by 0.8%. All this appears to add-up to strong demand from the e-retailing sector but slowing demand from business-to-business activity. The result was revenue down 1.9% and income down 0.4%.

International volumes were even more contrasting. Income jumped 10% but revenue fell by 7%, in great part due to a combination of lower fuel surcharges and currency fluctuation. Volumes were down by 1.5% with a divergence between International Domestic (i.e. non-US domestic) which fell and cross-border traffic which rose. Business in Europe was strong whilst Asia was weak.

The picture was similar at the Supply Chain and Freight business, with falls in the underlying contract logistics and road freight business obscured by the effects of the purchase of Coyote Logistics. UPS said that its forwarding business had benefitted “from revenue quality initiatives” leading to “significant operating profit expansion”.

The temptation is to compare UPS’ equivocal performance with that of FedEx which said on Monday that it anticipated a rise of 12% in US domestic deliveries in the run-up to Christmas. However, UPS also said that its expectations were almost as great at a 10% increase in volume over the period.

It should be noted that the Year-to-Date numbers at UPS are seeing rises of 36% in net profit, admittedly before substantial pensions related exceptionals. Yet the pessimistic aspect of these numbers is more to do with the suggestion of a slowing industrial sector in the US which contrasts with the optimism seen earlier in the year.