By Rip Watson, Senior Reporter This story appears in the Oct. 25 print edition of Transport Topics.
UPS Inc. said Oct. 21 its third-quarter net income jumped 80% to $991 million from a year earlier, on the strength of higher rates and rising profits for domestic and international packages.
Companywide revenue increased 9.3% to $12.19 billion, and earnings per share rose to 99 cents. In the third quarter last year, net income was $549 million, or 55 cents a share.
“UPS is on our way back to high levels of profitability,” Chief Financial Officer Kurt Kuehn said on an Oct. 21 conference call.
UPS, which ranks No. 1 on Transport Topics list of the largest for-hire carriers in the United States and Canada, said profits nearly doubled in the domestic package business, which accounts for 60% of revenue. It also raised its 2010 profit forecast to $3.48 to $3.54 a share. Its prior forecast was $3.35 to $3.45.
“I don’t think we have seen any [economic] change over the last several months,” Kuehn said. “October is moving along at a steady pace. We’re in a moderate economy. We’re in a probably 2% to 2.5% [gross domestic product growth] type of economy.”
Other trends also are positive, he said, including the potential to continue rebuilding inventories and expectations that improvement in the manufacturing sector will continue in the fourth quarter.
While profits surged at UPS’ largest businesses, CEO Scott Davis said less-than-truckload unit UPS Freight “isn’t there yet,” a situation that he tied to general weakness in that sector.
“LTL is still a very tough place to be,” Davis said on the conference call. “The majority of it is the environment. The price environment is beginning to firm, but there were a couple of years there where it was extremely challenging. When the freight segment really begins contributing, we’ve got even better results ahead.”
UPS, which does not disclose profit for its trucking unit, said LTL revenue rose 11% to $527 million in the quarter, including a 6% increase in rates measured in revenue per 100 pounds of freight, a 1.9% growth in shipments and a 2.9% increase in tonnage.
Some other LTL carriers still are struggling. YRC Worldwide Inc. said its losses are narrowing from the third quarter last year, as well as the second quarter of 2010, although revenue dipped slightly. Con-way Inc.’s earnings are expected to decline, and FedEx’s freight unit reported a loss last month for its latest fiscal quarter.
UPS Freight is part of the company’s Supply Chain & Freight business, where operating income climbed 74% to $177 million.
The company attributed the results in that segment to improved revenue management, increased tonnage and improved operational efficiencies, as revenue rose 19% to $2.23 billion.
On the package side, domestic package results improved, with volume rising 3.6% and revenue per piece increasing 4.1% after rate increases and fuel surcharges.
Domestic package shipments were assisted by cost savings after an operational restructuring, the company said in its announcement.
Revenue in that business rose to $7.29 billion, a 6% increase, and operating in-come nearly doubled to $1.02 billion.
International package volume rose 13%, but revenue per shipment was off 1.2%. Volume growth was powered by growth in all regions, with Asia outpacing other parts of the world.
International revenue was $2.68 billion, an 11% increase. Operating profit in that segment improved by 34%.
The results included a $109 million before-tax profit on a real estate sale. Excluding that sale, net income was $930 million, or 93 cents a share, a 69% improvement from the year before.
