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April 27, 2021 8:30 AM, EDT

Volume Continues to Surge at UPS to Start the Year

UPS truck and driverA UPS driver delivers packages in Philadelphia on April 26. (Matt Rourke/AP)

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The continued surge of e-commerce deliveries from small and medium-sized businesses, along with the increase in deliveries of the various COVID-19 vaccines and other personal protective equipment, bolstered UPS Inc.’s first-quarter financial results.

Atlanta-based UPS said April 27 that its first-quarter net income was $4.79 billion, or $5.47 diluted earnings per share, compared with $965 million, $1.11, in the comparable year-ago quarter.

Analysts had been expecting $1.72 a share.

Carol Tome

Tomé

Revenue surged to $22.91 billion, up 27% compared with $18.04 billion a year ago, also exceeding analysts’ expectations of $20.49 billion.

“We reported record profits and a double-digit operating margin in our U.S. Domestic segment, record first-quarter profit in our International segment and record operating profit and operating margin in Supply Chain and Freight,” CEO Carol Tomé said on a conference call with analysts and reporters after the quarterly results were announced.

U.S. revenue rose 22% to $14.01 billion in the quarter, from $11.45 billion in 2020, and international revenue soared 36% to $4.61 billion from $3.38 billion in the same period a year ago. Much of the growth, the company said, was in Asian and European markets.

UPS continues to see a surge in e-commerce business, which now accounts for more than 21% of the total U.S. economy, according to a recent report from Mastercard.

Home deliveries of packages of all sizes have skyrocketed over the past 14 months because of the COVID-19 pandemic.

Revenue from the company’s supply chain and freight business also rose 34% to $4.29 billion from $3.19 billion last year.

Tomé said 63% of the revenue increase came in growth from small and medium-sized businesses, along with an increase in its health care division.

To date, the company said it has delivered nearly 196 million doses of the vaccines for COVID-19 to an estimated 50 nations and territories.

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“Our focus on [small and medium businesses] and health care does not take away our desire to grow our large enterprise accounts, which are many large retailers,” Tomé said. “That’s really laying the future for our growth going forward. Coupled with health care, those two growth opportunities are a winning combination.”

The earnings gain was fueled by a $2.5 billion after-tax, market-to-market pension change that was part of the American Rescue Plan Act. The legislation was signed into law in March and it contains relief for nearly 200 multiple-employer pension plans, often from the same industry, and they were going insolvent the next several years.

The law freed UPS of liabilities tied to the Teamsters Union and its Central States Pension Fund, which pension experts said would be insolvent in the late 2020s, had President Joe Biden not signed the bill. In October 2007, as part of a new contract with its Teamsters Union drivers and other employees, UPS pulled out of the Central States fund and shifted those workers into its company plan, at a cost then of $6.1 billion. At that time, both the company and union applauded the decision, saying it would help protect the pensions of the 44,000 active UPS employees in the pension program. The new law will protect pensions through 2051.

UPS said as a result of the new law it will save $6.4 billion.

TFI International logo

UPS also updated reporters and analysts on the status of its sale of UPS Freight to TFI International for $800 million. As part of the agreement, UPS and TFI are entering into a five-year contract where TFI will continue to use UPS’ domestic network to move packages.

Tomé said the deal should be finalized in the second quarter.

At the time the sale was announced, Tomé said she wanted to sell UPS Freight so the company could concentrate on its core business units. To that end, Tomé said the company continues to invest time and money in its efforts to increase its Saturday delivery coverage area this year.

“Our Saturday coverage will increase to 90% of the U.S. population by October,” Tomé remarked. “We’re increasing our weekend delivery because our customers are demanding that. There is no finish line here,” she said. “We are expanding our weekend deliveries.”

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

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