Atlanta-based United Parcel Service (UPS) has announced second quarter 2015 diluted earnings per share (EPS) of US$1.35, a 12% increase from adjusted results for the same period last year.
The outcome was at the higher end of the 6%-to-12% guidance range for 2015 set by the company and was higher than market expectations.
Revenue growth, however, was dampened by currency exchange rates and lower fuel surcharges, down 1.2% from the same quarter last year to $14.1 billion.
In a statement, the logistics and forwarding service giant said all of its three segments—domestic package, international package, and supply chain and freight—improved profitability and expanded margins, particularly the last two divisions.
“During the quarter, UPS continued to invest for the future by expanding capacity and launching new capabilities that provide higher value to customers,” said David Abney, group chief executive officer. “The strong momentum in our International segment is expected to continue and gives us confidence in achieving the upper end of our guidance range.”
On a reported basis, operating profit increased $1.2 billion, and diluted earnings per share was up $0.86 from diluted EPS of $0.49 in the same period in 2014.
Total company shipments increased 2.1% over the second quarter last year to 1.1 billion packages, led by U.S. deferred air products and international exports.
International operating profit increased $81 million, or 17% over the adjusted results for the same period in 2014, and export shipments surged 5.5% with intra-Europe growth recorded.
Network improvements, volume growth, and price increases all contributed to expanded operating margin and increased profitability.
On a reported basis, operating profit for international package operations increased $108 million after the transfer of post-retirement liabilities to healthcare plans in the second quarter of last year.
Underlying base rates were up across all regions, though revenue per package decreased 2.4% on a currency-neutral basis. Lower fuel surcharges reduced reported revenue per package by about 350 basis points.
On the other hand, supply chain and freight operating profits improved $31 million, or 18% over the adjusted results for the same quarter 2014, driven by gains in forwarding. Revenue declined 4.5% to $2.2 billion, due to forwarding revenue management initiatives, strong U.S. currency, and lower fuel surcharges at Freight.
On a reported basis, operating profit increased $113 million after the transfer of post-retirement liabilities to healthcare plans that occurred in the second quarter of 2014.
Forwarding operating profit and margin expanded as the business unit continued to implement a “disciplined pricing strategy across key trade lane,” said UPS. Freight revenue declined 2.5% due to lower fuel surcharges and a drop in tonnage driven by changes in customer mix and slowing market growth. LTL (less-than-truckload) revenue per hundredweight growth remained positive, with a 1.4% gain.
“The second quarter results reflect continuing gains in our International business,” said Richard Peretz, UPS chief financial officer. “Even though the U.S. economy appears to be growing at a slower pace, our global portfolio and performance reinforces our expectations to attain the higher-end of the guidance range.”
Guidance for 2015 full-year diluted earnings per share is $5.05 to $5.30, a 6% to 12% increase over adjusted 2014 results.
TNT rides on growth of SMEs
In other developments, TNT Express registered adjusted revenue growth of 6.2% to EUR1.757 billion or US$1.944 billion (4.1% at constant FX) in the second quarter of the year, driven by the continued growth of revenues from small and medium-scale enterprises (SMEs).
Adjusted operating income was EUR41 million in the second quarter, EUR29 million below last year. Profitability was affected by IT transition and outlook project costs (EUR15 million), costs to introduce new services and facilities, as well as pricing pressures.
Tex Gunning, TNT’s chief executive officer, said: “TNT’s turnaround is progressing well under our Outlook strategy. Service levels and customer satisfaction scores further improved. We are achieving good growth in the SME customer segment after years of decline.”
He added that the company expects 2015 to be “a transition year in terms of bottom-line performance, as we continue to invest in the transformation of TNT.”
On its market prospects, the firm has seen some positive developments in Western Europe, “but we remain cautious given the economic volatility in China, Brazil, Australia and Greece.”
He also commented on the proposed purchase of the Dutch logistics firm by American rival FedEx, saying that “the management team believes this is a very positive development for all our stakeholders.”
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