United Parcel Service, Inc.
(
UPS
) reported third quarter 2012 earnings per share of $1.06, in
line with the Zacks Consensus Estimate. However, earnings per
share decreased 2.8% from the year-ago adjusted earnings of
$1.09.
Total revenue for the quarter dipped 0.7% year over year to
$13,071 million and missed the Zacks Consensus Estimate of
$13,346 million. Consolidated volume grew 2.9% year over year
while average revenue per piece fell 1.4% year over year.
Total adjusted operating profit dropped 0.2% year over year to
$1,662 million. Adjusted operating margin remained flat year over
year at 12.7%.
Revenue Segments
US Domestic Package
revenue rose 1.2% year over year to $7,861 million in the
reported quarter. Operating profits were down 2% year over year
to $1,025 million. Operating margin deteriorated 50 bps to 13.0%
from 13.5% in the year-ago quarter.
International Package
revenue dropped 3.7% year over year to $2,943 million due to
uncertainties in the global economy and poor exports from Asia.
Additionally, negative currency translation also impacted the
segment's revenue performance.
Operating profit rose 7.7% year over year to $449 million in
the reported quarter and operating margin expanded to 15.3% from
13.6% in the year-ago quarter. Average daily volume declined 1.2%
year over year on a 2.7% drop in non-U.S. domestic average daily
volumes offsetting 1.2% growth in export average daily volumes.
Revenue per piece was also down 1.3% from the year-ago
quarter.
Supply Chain and Freight
segment revenues were down 3.2% to $2,267 million due to lower
yields that offset volume gains. Operating profit decreased 7.4%
to $188 million due to declines in forwarding business that
offset improvements in freight business. Operating margin
contracted 40 bps year over year to 8.3%.
Liquidity
At the end of the third quarter, the company generated free
cash flow of $3.6 billion and spent $1.6 billion. The company
repurchased 18.5 million shares for approximately $1.4
million.
Guidance
In 2012, the company expects adjusted diluted earnings per
share to range between $4.55 and $4.65.
Our Analysis
Over the long term, we believe the company will continue to
invest in technology and network enhancements. Its integrated
sales approach also promises future growth given its
industry-leading margins and financial strength. The company is
also seeking capacity adjustment to improve cost structure.
Moreover, United Parcel Service continues to accelerate
shareholder returns in the form of higher dividends and share
buybacks. However, labor unionization, large European exposure
and competitive threats from peers like
FedEx Corp
. (
FDX
) keep us cautious on the stock.
We, currently, have a long-term Neutral rating on UPS. For the
short term (1-3 months), the stock retains a Zacks #3 Rank
(Hold).
FEDEX CORP (FDX): Free Stock Analysis Report
UTD PARCEL SRVC (UPS): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research