UPS Q2 results
UPS has announced its Q2 2019 results, recording a 3.4% increase in revenues, up to $18,048m in comparison to Q2 2018. This was primarily driven by gains in average daily volume in the US and higher-quality, currency-neutral revenue in the International segment. Total operating profit grew nearly 21%, and 6.3% on an adjusted basis, with growth in all segments. Total operating margin expanded 170 basis points; adjusted operating margin expanded 30 basis points.
The U.S. Domestic segment generated significant volume growth in all products, led by a 30% surge in UPS Next Day Air volume. The sharp increase in demand for the company’s next-day services was driven by accelerated delivery requirements from e-commerce shippers.
The International segment generated revenues of $3,505m and operating profit was $663m. International volume slightly declined due to global macroeconomic pressure and tough year-over-year comparisons, as Q2 2018 exports grew 9.5%. Total revenue per piece fell less than 1% but grew nearly 2% when adjusting for currency. International domestic revenue per piece rose 0.3%, an increase of 5.6% on a currency-neutral basis.
Supply Chain and Freight recorded revenues of $3,393m and an operating profit of $272m. Successful cost management enabled by the company’s asset-light strategies delivered strong financial results while revenue was pressured by softer trade. Operating margins expanded to 8% on an adjusted and unadjusted basis. Coyote and Marken made significant contributions to operating profit. UPS Freight achieved a 3.9% increase in revenue per LTL (less-than-truckload) hundredweight as the unit focused on revenue quality.
“Our Transformation initiatives are generating greater efficiencies across the network and, when combined with our growth strategies, UPS achieved profit growth in all segments,” said David Abney, UPS chairman and CEO.
New Product Launches
UPS has continued to focus on transformation initiatives, announcing the most extensive roll-out of new customer services and capabilities in the company’s recent history. The new solutions are designed to capture growth opportunities in strategic markets: small and medium-sized businesses (SMBs), e-commerce, high-growth international countries, and healthcare and life sciences. These market segments were outlined by company leaders as priority growth areas when addressing investors at the company’s Transformation Conference in September 2018.
UPS has launched UPS My Choice for Business Service Platform, building on its existing service UPS My Choice for home. The service will provide SMBs with inbound and outbound shipping control and visibility. Features include a web-based dashboard, advance delivery notifications for “day-before” and “day-of” delivery alerts with estimated arrival times within two hours.
As part of ongoing plans, UPS is making major investments to optimise transportation assets, shipping modes and technology resources to improve time in transit. Launching in January 2020, UPS intends to reduce transit times between major cities and enhance delivery capabilities. In order to do so it is introducing extended hours pickup for next-day ground delivery and seven-day pick-up and delivery services.
Over the last several months, UPS claims to have significantly increased its market share in the next-day air package market. The company is deploying aircraft to shipping lanes in line with market needs. Previously announced investments in the UPS airline network are providing flexibility for growth as customer expectations shift toward faster delivery times. UPS has taken delivery of 18 of the 44 new aircrafts that it had previously announced. Throughout 2019 it will receive a further 11 aircrafts and the remaining 15 will be received by 2022.
An important element of the company’s e-commerce growth strategy is broadening and simplifying access for UPS customers by partnering with retailers. UPS currently has more than 40,000 UPS Access Point and 38,000 drop-box locations around the world. UPS intends to expand its UPS Access Point network over the coming months with up to 12,000 additional locations across CVS Pharmacy, Michaels and Advance Auto Parts stores, with initial store pilot efforts already underway.
UPS has also launched UPS Worldwide Economy, a new deferred service designed to provide affordable and efficient international shipping options. This new service initially will be available to UPS customers in the US, Canada, China, Hong Kong and the UK, with additional key global markets being added in the near future.
To scale drone operations in targeted markets faster, UPS has filed for Part 135 certification from the Federal Aviation Administration to operate a newly established UPS subsidiary called UPS Flight Forward, Inc. The certification, when granted, will allow application for FAA-approved flight operations beyond line of sight, at night, and with an unlimited number of drones and operators in command.
UPS and its partner, Matternet, currently operate special drone healthcare deliveries of medical samples under FAA Part 107 rules at WakeMed hospitals in Raleigh, N.C. Part 135 certification will allow for service expansions to several other US healthcare networks.
Source: UPS
