Strong Revenue Growth and …
Consolidated Revenue: $22.2 billion, an increase of 5.6% year-over-year.
Consolidated Operating Profit: $2 billion, up 22.8% from last year.
Consolidated Operating Margin: 8.9%, an increase of 120 basis points compared to last year.
Diluted Earnings Per Share: $1.76, up 12.1% from the third quarter of 2023.
US Domestic Revenue: $14.5 billion, up 5.8% year-over-year.
US Average Daily Volume (ADV): Increased 6.5% compared to the third quarter of 2023.
International Revenue: $4.4 billion, up 3.4% from last year.
International Operating Margin: 18%, up 220 basis points year-over-year.
Supply Chain Solutions Revenue: $3.4 billion, up 8% year-over-year.
Free Cash Flow: $4 billion year-to-date, including a $1.4 billion pension contribution.
Full Year Revenue Outlook: Approximately $91.1 billion.
Full Year Operating Margin Expectation: Approximately 9.6%.
Capital Expenditures: Expected to be about $4 billion for the full year.
Dividends Paid: $4 billion year-to-date.
Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
United Parcel Service Inc (NYSE:UPS) achieved a 5.6% increase in consolidated revenue, reaching $22.2 billion in the third quarter of 2024.
The company reported a 22.8% increase in consolidated operating profit, amounting to $2 billion, with an operating margin of 8.9%.
UPS saw its highest year-over-year average daily volume growth rate in the US since the first quarter of 2021, with a 6.5% increase.
The international segment experienced revenue growth across all regions, with a 3.4% increase in revenue and a 17.3% rise in operating profit.
UPS’s focus on healthcare logistics is paying off, with $2.5 billion in consolidated healthcare revenue contributing to growth across all segments.
The macroeconomic environment was worse than expected, with a slowdown in US online sales and lower manufacturing activity impacting volume.
Despite improvements, the international average daily volume growth was flat, indicating challenges in maintaining momentum.
The supply chain solutions segment saw a decline in operating profit due to the transition costs associated with onboarding USPS Air Cargo business.
Revenue per piece in the US domestic segment declined by 2.2% year-over-year, although there was a slight sequential improvement.
The company faced challenges with the unexpected surge of short zone, lightweight e-commerce packages, impacting pricing and operating plans.
Q: Can you explain the drivers behind the expected 50% increase in operating profit from Q3 to Q4, and how this might affect profitability in 2025? A: Brian Dykes, CFO, explained that the increase is driven by a focus on revenue quality, pricing policy adjustments, and productivity initiatives like Fit to Serve and Network of the Future. These factors are expected to provide an incremental bump over normal seasonality. The company is confident in these drivers and expects to maintain a positive trajectory into 2025.
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Q: What are the themes and concerns from customers regarding the softer peak season, and how is UPS handling pricing and surcharges? A: CEO Carol Tome noted that customer forecasts have been tempered due to a compressed peak season and varying external forecasts. Despite this, UPS is prepared to handle the volume and is seeing a good take rate on holiday surcharges. Matthew Guffey, Chief Commercial and Strategy Officer, added that UPS is working closely with customers to manage holiday demand surcharges effectively.
Q: How is UPS managing cost improvements on a per-piece basis, and what are the expectations for Q4 and 2025? A: Brian Dykes highlighted that cost performance in Q3 was strong due to lapping the labor contract and productivity initiatives. For Q4, costs per piece are expected to rise slightly but remain below revenue per piece growth. Nando Cesarone, President U.S. and UPS Airline, emphasized ongoing productivity improvements and network optimization.
Q: How is the USPS air cargo business integration progressing, and is it meeting profit expectations? A: Carol Tome stated that the USPS volume is fully onboarded, and the fourth quarter will look different from the third. Nando Cesarone confirmed positive feedback from the USPS and alignment with initial profit expectations, indicating a successful integration.
Q: What is the status of the Fit to Serve initiative, and are there additional opportunities for cost savings? A: Brian Dykes reported that Fit to Serve is ahead of forecast, with incremental savings expected in Q4. Carol Tome added that UPS is continuously exploring opportunities to enhance customer experience and productivity, indicating an opportunity-rich environment for further improvements.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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