UPS drives forward on e-retail wave but is still cautious


UPS delivered another strong set of figures for the past quarter as e-retail continued to drive the Atlanta-based group forward.

The company as a whole saw revenue hit $22.9bn which represented a 27.0% increase year-on-year. Operating profit leapt by 158.0% year-on-year to $2.8bn. The profit numbers were assisted, however, by pension revaluations, yet the underlying picture was still strong. 

At the core U.S. Domestic business, which seems to be reporting independently now, revenue grew by 22.3% year-on-year to $14bn with operating profit hurtling forward by 273.4% to $1.4bn. Volumes were more mixed than the numbers might imply, with the U.S. Domestic market seeing growth in ‘B2C’ of 23.8% but ‘B2B’ shrank through much of the quarter only recovering in March. However, UPS commented that revenue was aided by growth from “small and medium-sized businesses” but it was ‘Ground’ that saw margins firming up the most.

International express also saw violent growth, with revenue jumping by 36.2% to $4.6bn whilst operating profits doubled to $1.1bn. Daily volumes grew by 23.1% with Asia and Europe being drivers of demand, possibly a reflection of the strength of imports into the US. Profit margins remain very strong.

Even Supply Chain & Freight was strong and this operates in different markets to the other businesses. The contract logistics and freight forwarding business saw revenue up by 34.3% to $4.291bn whilst operating profit was up 104.5% year-on-year at $321m. UPS explained that “forwarding led the way, driven by strong growth on the outbound Asia lane; both air and ocean”, however, unsurprisingly healthcare demand was also strong.

It might be expected that these impressive results would make UPS bullish about the future, but no. Carol Tomé struck a cautious note speaking to investors, saying “due to uncertainty ahead, UPS is not providing revenue or diluted earnings per share guidance at this time” citing issues such as the need for higher capital expenditures and uncertainty about the direction of the economy. This is interesting as it highlights the level of volatility in retail, wider consumer demand and the possibility of sharp corrections in areas such as healthcare demand but also the dynamics of airfreight in the near future.

Source: Transport Intelligence, April 29, 2021

Author: Thomas Cullen