UPS sees solid Q1 results driven by revenue quality initiatives

First quarter 2022 earnings results issued today by Atlanta-based global transportation and logistics services providerUPS指出B持续强劲增长的水平ig Brown.

Quarterly revenue—at $24.4 billion—saw a 6.4% annual gain, and adjusted earnings per share—at $3.05—marked a 10.1% annual gain, topping Wall Street expectations of $2.88 per share. Quarterly operating profit was up 17.6% to $3.3 billion.

“ldquo;I want to thank all UPSers for their outstanding efforts during a challenging first quarter to serve the needs of our customers,” said Carol Tomé, UPS chief executive officer, in a statement. “The agility of our network and the continued execution of our strategy delivered another quarter of strong financial performance, putting us on our way to achieving our 2022 consolidated financial targets.”

Individual segment results for UPS in Q1 2022:

• U.S. domestic package revenue saw an 8.0% annual increase, to $15.124 billion, and average daily package volume fell 3.3%, to 19.741 million, with UPS attributing the revenue growth to a 9.5% gain in revenue per piece, to $11.97;
• International Package revenue, at $4.876 billion, rose 5.8%, driven by the gains in revenue per piece, with average daily volume down 3.7%, to 3.537 million, and total revenue per package up 10.5%, to $20.45; and
• Supply Chain Solutions revenue, at $4.378 billion, up 2.0% paced by a 25% increase in its Forwarding group, to $2.589 billion

CEO Tomé said on the company’s earnings call today that UPS’s the flexibility of the UPS network allowed UPS to continue delivering for its customers within a dynamic environment.

“在许多方面,这是我们的一个更challenging quarters, as our international small package business faced tough year-over-year comparisons, and demand was negatively impacted by ongoing disruptions due to the pandemic,” she said. “But, at the same time, we scurried to keep up with heightened demand in our forwarding and healthcare businesses. No matter what came our way, we kept delivering with outstanding service levels.”

Looking ahead, she said UPS thinks the macroenvironment will be very dynamic, while seeing many positive within the company’s business, in the form of high service levels, market share gains, increased agility, and controlling what it can control to achieve the financial targets it has laid out.

For 2022, UPS has a full-year financial target of roughly $102 billion in consolidated revenue, a consolidated operating margin of around 13.7%, and capital expenditures of 5.4% of revenue, or around $5.5 billion, among others.

UPS财务总监布莱恩•纽曼在会上说,UPS前沿空中管制官ed a challenging operating environment in the first quarter, due to external factors, including how Omicron negatively impacted retail sales in early January and pressured volumes.

“The impact of Omicron subsided in February, and volume growth turned slightly positive,” he said. “Then late in the quarter, the combination of record-high inflation, a surge in energy prices, COVID-19 lockdowns in Asia, and geopolitical uncertainty resulted in our consolidate volume growth rate turning negative. Despite these external factors we remain agile and delivered strong first quarter results by continuing to execute our strategy and quickly adjusting our network to match capacity with the needs of our customers.”

Addressing the UPS domestic business, Newman said quarterly growth was paced by continued gains in revenue quality and by leveraging the agility of the UPS network to control costs. UPS had planned for volume to be down slightly in the first quarter based on volume projections from a few of its largest customers and expected to fill that gap with other enterprise volume but it was not supported by market conditions.

What’s more, there was a 7.4% decline in U.S. residential package volume in the quarter, due in part to the timing of fiscal stimulus checks sent to U.S. consumers in March 2021, leading to what he called difficult annual comparisons.

“A decline in residential volumes led to a reduction in SurePost volume of about 12,000 packages per day,” he said. “The decrease in residential volume was partially offset by a 3.6% increase in B2B average daily volume, with growth from both enterprise and SMB customers. In the first quarter, B2B represented 43% of our volume, which was up from 40% in the first quarter of 2021.”

Jerry Hempstead, president ofHempstead Consulting, toldLMthat despite the fact that both domestic and international volumes were down (in particular international down 7%), revenues for both were up which translated to considerably higher profits.

“This reflects the higher rates and accessorials imposed since last year,” he said. “Not a good omen for shippers. UPS is sticking with their mantra’ better not bigger,’ so there does not appear to be a hunger to price to attract new accounts. Granted, FedEx is on the same path. Both UPS and FedEx recently upped their fuel surcharge formula so I expect even higher revenue and profit in the next quarter’s announcement.”