United Parcel Service, Inc. ( UPS ) reported first
quarter 2013 adjusted earnings per share of $1.04 surpassing the
Zacks Consensus Estimate of $1.01. Earnings per share registered
growth of 4% from $1.00 in the year-ago quarter mostly driven by
increased e-commerce activities. Adjusted earnings for the quarter
excluded the impact of an after-tax gain of $36 million on
transactions related to the company's attempt to acquire TNT
Total revenue for the quarter grew 2.3% year over year to $13,434
million but fell short of the Zacks Consensus Estimate of $13,456
million. The year-over-year growth was driven by improved B2C sales
along with stronger post holiday sales in Jan. In addition, UPS
domestic business also reflected strong revenue growth.
Total adjusted operating profit rose 3.2% year over year to $1,619
million. Operating margin improved 20 basis points (bps) year over
year to 12.1%.
US Domestic Package revenues rose 3.3%
year over year to $8,271 million in the reported quarter. Operating
profit grew 9.0% year over year to $1,085 million. Operating margin
grew 70 bps year over year to 13.1%. The margin expansion was
driven by solid volume growth, improved network efficiencies and
higher base rates. Average daily volume increased 4.4% on increased
online shopping. Revenue per piece improved 0.4% year over year
driven by higher rates.
International Package revenues rose 0.4%
year over year to $2,978 million. Operating profit fell 4.2% year
over year to $391 million and operating margin contracted 70 bps to
13.1%. Average daily volume grew 1.8% year over year on strong
international shipments in Europe and Asia. Revenue per piece fell
0.5% year over year.
Supply Chain and Freight segment
revenues inched up 0.9% to $2,185 million. Operating profit plunged
13.9% year over year to $143 million. Operating margin contracted
120 bps year over year to 6.5%.
UPS generated free cash flow of $1.4 billion and spent $453
million in the first quarter. The company repurchased 12.2 million
shares worth $1.0 billion and paid dividends of $572 million in the
For 2013, UPS continues to expect earnings per share of
$4.80-$5.06, representing growth of 6-12% over 2012 adjusted
Despite the challenging economic conditions, we remain encouraged
by UPS' continued productivity gains, improved operating profit,
and strong free cash flow position. Despite the failure of its mega
Dutch acquisition of TNT Express N.V., the company remains focused
on smaller acquisitions to expand its footprint globally.
Over the long term, we believe the company will continue to
invest in technology and network enhancements. Its integrated sales
approach also promises growth given its industry-leading margins
and financial strength. However, we remain concerned over the
volatile economy condition that continues to restrict market
demand. Further, the company is also exposed to unionized workforce
and intense competition from giants like FedEx
Corporation ( FDX ).ATLAS AIR WORLD (AAWW): Free Stock Analysis
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UPS, which operates with the likes of Air Transport
Services Group, Inc. ( ATSG ) and
Atlas Air Worldwide Holdings Inc. ( AAWW ) retains a
Zacks Rank # 3 (Hold).