UPS Q4 Earnings Beat Estimates, Revenues Miss, Increase Y/Y

United Parcel Service, Inc.UPS reported fourth-quarter 2018 earnings (on an adjusted basis) of $1.94 per share, surpassing the Zacks Consensus Estimate of $1.91. Earnings increased almost 17% on a year-over-year basis. It seems that the earnings beat pleased investors. Consequently, shares of the company gained in early trading.

UPS recorded revenues of $19.85 billion, which fell short of the Zacks Consensus Estimate of $19.92 billion. However, revenues increased year over year mainly due to an impressive performance by UPS in the holiday season.

Segmental Details

U.S. Domestic Package revenues climbed 6.3% year over year to $12,575 million in the fourth quarter driven by a 4.8% increase in revenue per piece. Growth was witnessed across all products. Premium Next Day Air revenue increased in excess of 10%, and volume growth was 7.8%.

Strong revenue yields and upbeat on-time performance aided segmental results. The division delivered more than 21 million packages per day (on an average). However, segmental operating profit declined more than 8% to $999 million due to high costs.

International Package revenues improved 2.9% to $3,829 million. Results were aided by strong growth in Europe. Segmental revenue per piece increased 1.7%. The measure increased 4.2% on a currency-neutral basis. Segmental operating profit increased 6.3% to $781 million. On a currency-neutral basis, the metric improved 9.8%. Factors like prudent cost management and impressive revenue yields aided results. Driven by improved operating leverage, operating margin expanded 80 basis points to 20.6% on a currency-neutral basis.

United Parcel Service, Inc. Price, Consensus and EPS Surprise

United Parcel Service, Inc. Price, Consensus and EPS Surprise | United Parcel Service, Inc. Quote

Supply Chain and Freight revenues increased 0.7% to $3,444 million. Operating profits in the segment decreased 7.1% to $224 million in the fourth quarter. The metric declined mainly due to the UPS Freight contract ratification process.

Annual Results

For full-year 2018, the carrier's earnings (on an adjusted basis) came in at $7.24 per share. Revenues increased 7.9% to nearly $71.9 billion. The Zacks Consensus Estimate was o f earnings of $7.22 per share on revenues of $71.94 billion.

Other Details

UPS, which like its rival FedEx Corporation FDX , had left no stone unturned to ensure a successful holiday season, generated free cash flow of $6.13 billion and spent $6.28 billion as capital expenditure in 2018. Moreover, UPS paid approximately $3.2 billion as dividend to shareholders in 2018, up 10%. Additionally, it bought back 8.9 million shares for $1 billion. We are impressed with the company's efforts to reward shareholders consistently through buybacks and dividend payouts.


UPS, carrying a Zacks Rank #4 (Sell), expects 2019 adjusted earnings per share between $7.45 and $7.75, which includes $325 million of pension financing costs. The Zacks Consensus Estimate for 2019 currently stands at $7.76 per share.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

The effective tax rate for 2019 is expected in the range of 23-24%. Capital expenditures are anticipated between 8.5% and 10% of 2019 consolidated revenues. Moreover, the company expects total adjusted operating profit growth in 2019 to be in low-teens with all segments up double-digits.

Upcoming Releases

Investors interested in the broader Transportation sector are keenly awaiting fourth-quarter earnings reports from key players, such as Expeditors International of Washington EXPD and Old Dominion Freight Line, Inc. ODFL . While Old Dominion will release fourth-quarter results on Feb 7, Expeditors will report the same on Feb 19.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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