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October 28, 2020 12:30 PM, EDT

UPS Produces Strong Q3 Earnings Amid E-Commerce Surge

UPSPatrick Semansky/Associated Press

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UPS Inc. reported strong financial results in the third quarter as a surge in deliveries to businesses and homes lifted the Atlanta-based carrier through the three-month period.

It marked the second consecutive quarter in which UPS earnings and delivery volume numbers have dramatically increased, much of it because of e-commerce.

The parcel delivery giant, which reported third-quarter earnings Oct. 28, said earnings jumped to $2.4 billion or $2.24 a share — an 11% increase from $2.19 billion, or $2.01, in the 2019 period. Revenue was up 15.9% to $21.23 billion from $18.31 billion.

UPS’ results exceeded Wall Street’s expectations; the Zacks Consensus Estimate was for $1.86 per share.

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“Our performance highlights the agility of our global integrated network amid the ongoing challenges of the pandemic,” CEO Carol Tomé said. “Our results were fueled by continued strong outbound demand from Asia and growth from small and medium-sized businesses.”

The coronavirus pandemic and various state and local restrictions, including stay-at-home mandates, led to a boom in online deliveries. UPS said third-quarter revenue for domestic and international shipments rose by double digits.

Domestic package revenue was up 15.5% year-over-year to $13.2 billion from $11.4 billion in 2019.

International package revenue jumped 17% to $4.08 billion from $3.5 billion.

Supply chain and freight revenue rose to $3.9 billion from $3.36 billion.

The company said average daily volume increased 13.8%, with growth across all products.

Also in the third quarter, the company continued to see elevated residential demand. International shipments jumped 12%, in part because of a drop-off in overseas passenger traffic that also handles cargo, which means shippers have fewer options. Even with the sharp increase in domestic and international deliveries, UPS noted that its domestic adjusted profit margin fell to 9.8% from 11% a year ago due in part to residential service having fewer packages per stop than commercial service, requiring drivers to travel farther between stops.

The surge in shipping volume is not expected to diminish during the holiday season, and UPS and its competitors have told their larger customers there is no additional capacity available for the next several months.

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Chief Financial Officer Brian Newman said in a statement with the earnings announcement that UPS is working closely with its customers and “using our proven tools to control volume and ensure the resiliency” of its network during the coming peak season.

UPS announced last month that it would hire more than 100,000 workers to keep up with holiday demand. Retailers are stretching out to avoid overwhelming its worldwide delivery network already taxed by pandemic-fueled online shopping. Now the company says many of those positions still are open.

On Oct. 30, it plans to hire as many as 50,000 people, many of them on the spot, for warehouse associates, driver assistants and personal-vehicle driver positions. The event is dubbed “Brown Friday,” and UPS said nearly 40% of its seasonal workers last year stayed with the company.

Due to uncertainty surrounding the timing and pace of economic recovery, the company has suspended providing guidance on revenue or earnings.

UPS ranks No. 1 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 2 on the TT Top 50 list of the largest logistics companies in North America.

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