UPS Profits Edge Up in Third Quarter, Aided by International Results

David Paul Morris/Bloomberg News

This story appears in the Oct. 31 print edition of Transport Topics.

UPS Inc. said stronger international business helped boost third-quarter net income by 1% to $1.27 billion, or $1.44 per share.

One year ago, the company reported $1.26 billion in net income, or $1.39 per share.

In the most recent quarter, international package increased profits 14% to $576 million year-over-year, which UPS said was a record for any third quarter. International package volume went up 7.5%, and revenue rose 2.2% to $3 billion, which helped offset a 2.8% drop in the average revenue per shipment to $16.21.

Overall revenue increased 4.9% to $14.9 billion year-over-year.

Domestic package revenue rose 4.8% to $9.3 billion, but profit before interest and taxes fell 0.5% to $1.3 billion. Package volume increased 5.7% with growth in expedited, deferred and ground services. UPS said strong e-commerce growth continued in the third quarter, while business-to-business grew primarily due to online retail returns.

Supply chain and freight profits fell 5.9% to $206 million, hurt by the weak freight market. Revenue was up 8.1% to $2.61 billion, mostly due to the Coyote Logistics acquisition a little more than one year ago.

UPS Freight revenue dropped 5.3% to $701 million, down $39 mil- lion from one year ago. Revenue per hundredweight in the less-than-truckload unit increased 3.7% over the same period last year, but shipments per day were down 5.2% and tonnage fell 5.9%.

“The Supply Chain and Freight segment is navigating prolonged weak market conditions. They are making progress and adapting their business model and focusing on capturing the right revenue opportunities,” CEO David Abney said.

The company added it’s optimistic heading into the holiday season and projecting an increase of more than 14% compared with the 2015 holiday season. UPS plans to deliver more than 700 million packages globally between Thanksgiving and New Year’s Eve.

The company also announced that it’s ordering 14 new Boeing 747-8 airplanes with an option to buy another 14 of the airfreighters. The deal could be worth $5.3 billion, according to Bloomberg News.

“These aircraft are a strategic investment for increased capacity for UPS customers around the globe,” said Brendan Canavan, UPS Airlines president. “The 747-8 will allow UPS to upsize our network in both new and existing markets.”

Abney added that the first two planes should be delivered at the end of 2017.

Boeing had difficulty selling the 747-8 planes and announced in June that it would slow production to six aircraft per year, although the company might change course based on the deal with UPS.

Benjamin Hartford, an analyst with Robert W. Baird & Co. said it’s the first such purchase for UPS since 2013.

“We believe the purchase of the aircraft is appropriate and motivated to support ongoing growth in B2C [business to customer] related package volumes,” Hartford said.

Earnings for the company matched the consensus of analysts, according to a Bloomberg News survey.