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July 25, 2018 11:15 AM, EDT
UPS Reports Steady 2Q Income, Revenue
UPS tractor-trailer Daniel Acker/Bloomberg

UPS Inc. reported solid second-quarter growth in revenue and profits despite charges taken for its voluntary retirement plan and efforts to upgrade the firm.

The Atlanta-based multinational package delivery company reported net income of $1.5 billion and earnings per share of $1.71, up 7.3% from $1.4 billion and $1.58 per share in the same period a year ago. Growth across all major segments in the quarter led to a 9.6% rise in revenue, to $17.4 billion from $15.9 billion.

UPS took a $263 million, or 23 cents per-share, pretax charge due to costs related to the voluntary retirement plan announced in April.

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CEO David Abney told analysts during a conference call that economies in the United States, Europe and Asia look strong but that trade issues are causing concerns among its customers. Abney said UPS is an advocate for free trade and cross-border commerce, and the company is monitoring any changes in tariffs and international trade.

“We are seeing no impact at this time [from trade concerns], but we are having more frequent discussions with our customers on the issue,” Abney said.

The tentative agreement reached with the Teamsters union on a five-year contract was another positive accomplishment in the quarter, according to executives on the call. The leaders declined further comment on the topic as union members are scheduled to begin voting on the agreement in August.

In its domestic segment, UPS attributed the 6.3% growth in revenue to $10.4 billion from $9.7 billion to e-commerce demand and a 6.3% rise in revenue per piece as the company implemented higher base rates and fuel surcharges.

Operating profit for domestic declined from $1.3 billion to $939 million as UPS took a $196 million charge as it worked to transform the division.

Within the domestic group, the next-day air unit reported revenue of $1.8 billion, up 4.5% from $1.7 billion; deferred saw revenue of $1 billion, a rise of nearly 6%; and ground had revenue of $7.4 billion, up nearly 7%.

Average daily package volume tallied more than 16 million, up 2.6%, led by the ground group with 13.4 million packages. Average revenue per piece was $10.07, up 3.6%.

In the international segment, operating profit rose 8.2%, to $618 million from $570 million, representing the second-highest quarterly operating profit for the division. The European region led the improvement, UPS reported. Revenue for the international segment rose 14%, to $3.6 billion from $3.2 billion. The export unit had revenue of $2.7 billion, a 13% rise from $2.4 billion.

International saw 19.1 million average daily packages, up 3%. Average revenue per piece was $11.26, up 4.6%.

The supply chain and freight segment saw double-digit growth in revenue, increasing more than 16% to $3.5 billion from $3 billion, while operating profit came in at $216 million, an uptick of 1.9% from $212 million a year ago. The segment took a transformation charge of $31 million.

The supply chain segment focused on middle-market customers during the quarter. Its freight unit grew revenue 13% on higher pricing and tonnage increases, and the forwarding unit had revenue growth of 23%.

The freight group reported less-than-truckload revenue was $726 million, up 11% from $654 million. The LTL unit moved 2.6 million packages in the quarter, flat compared with a year ago.

Within supply chain, the forwarding group had revenue of $1.7 billion, up 23% from $1.3 billion, while the freight group’s revenue rose 13% to $853 million from $755 million.

UPS ranks No. 1 on the Transport Topics Top 100 largest for-hire carriers in North America