United Parcel Service, Inc.
) reported second quarter 2013 adjusted earnings per share of
$1.13, in line with the Zacks Consensus Estimate and consistent
with its own projection given last week. Earnings per share came
in below $1.15 earned in the corresponding quarter last year.
Earnings were primarily affected by a poor market scenario in
freight forwarding services and lower profits from International
Total revenue for the quarter grew 1.2% year over year to $13,507
million but fell short of the Zacks Consensus Estimate of $13,636
million. Growth in volumes and higher revenues from the U.S.
Domestic Package segment aided revenue accretion.
Total operating profit dipped 2.7% year over year to $1,742
million. Operating margin also deteriorated 50 basis points (bps)
year over year to 12.9%.
US Domestic Package
revenues rose 2.3% year over year to $8,241 million in the
reported quarter. Operating profit dropped 0.2% year over year to
$1,132 million. Operating margin fell 40 bps year over year to
13.7%. The margin contraction was due to unfavorable customer and
product mix followed by higher pension costs and difficult
year-over-year comparisons for fuel surcharges.
Average daily volume increased 1.9% on increased online shopping.
Revenue per piece improved 0.3% year over year driven by higher
revenues rose 1.6% year over year to $3,062 million. Operating
profit fell 0.7% year over year to $451 million and operating
margin contracted 40 bps to 14.7%. Average daily volume grew 5.0%
year over year on strong international shipments in Europe and
Asia. Revenue per piece fell 3.4% year over year.
Supply Chain and Freight
segment revenues were down 3.2% year over year at $2,204 million.
Operating profit plunged 21.3% year over year to $159 million.
Operating margin contracted 170 bps year over year to 7.2%. The
decline in profits and margin contraction is mainly due to
pressure on the company's freight forwarding business owing to
lower demand across trans-Pacific business networks.
UPS generated free cash flow of $2.5 billion and spent $990
million in the second quarter. The company also repurchased 21.8
million shares worth $1.8 billion and paid dividends of $1.1
As guided on Jul 12, 2013 adjusted diluted earnings per share are
likely to the range between $4.65 and $4.85. The projection
represents year-over-year growth of 3% to 7%. In the second half
of the year, the company expects earnings growth to accelerate,
representing growth rate of 4% to 13%.
Despite the challenging macroeconomic conditions, UPS has a
strong hold within the industry with a focused approach towards
expansion, various strategic measures, collaborations with other
leading firms, a well-defined business model and constant
Its integrated sales approach also promises growth given its
industry-leading margins and financial strength. However, we
remain concerned about the volatile economy condition that
continues to restrict market demand. Further, rising pension
headwinds also keep us on the sidelines.
EXPEDITORS INTL (EXPD): Free Stock Analysis
FEDEX CORP (FDX): Free Stock Analysis Report
RADIANT LOGIST (RLGT): Free Stock Analysis
UTD PARCEL SRVC (UPS): Free Stock Analysis
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UPS, which operates with the likes of
Expeditors International of Washington Inc.
Radiant Logistics, Inc.
) retains a Zacks Rank # 4 (Sell).