Package delivery service giant United Parcel Service (UPS) reported fourth quarter 2013 earnings of US$1.25 per share, a 7-cent decline from 2012 fourth quarter results owing to higher U.S. operating costs as shipment orders surged during the holidays.
“As the retail market shifts to a direct-to-consumer model, more and more companies are leveraging UPS solutions,” said Scott Davis, UPS chairman and CEO. “As a result, we experienced an unprecedented increase in volume, exceeding even our most optimistic plans. UPS will make the necessary investments and operational improvements to ensure we meet the needs of the marketplace.
“The increased volume put a strain on our network, causing delays. In response, UPS deployed additional people and equipment, placing a greater emphasis on service than cost,” Davis explained.
Average daily package volume increased 6 percent, as total deliveries in December surged 20 percent. The company delivered 20 million packages per day during the fourth quarter.
During the holiday period, global daily deliveries exceeded expectations, with more than 29 million packages in five days and a peak volume exceeding 31 million on December 23. Also during this period, UPS experienced 10 days with delivery volume that exceeded the company’s previous high.
Total shipments in 2013 increased to 4.3 billion, a 3.9 percent improvement over 2012.
U.S. domestic fourth quarter revenue improved 4.2 percent to $9.3 billion, while daily package volume increased 5.6 percent. Total revenue per package declined 1.3 percent, as lower fuel surcharges, changes in product and customer mix, as well as higher service refunds, contributed to the drop.
International revenue increased 5.3 percent to $3.4 billion on 8.8 percent growth in daily package volume. UPS export products rose 9.5 percent per day, driven primarily by 13 percent growth in Europe and significant growth in the Asia-to-Europe trade lane.
The company announced plans to repurchase $2.7 billion of UPS shares during 2014. It added that they expect to spend about $2.5 billion in investments this year to deploy new technologies, expand capacity, and modernize hubs.
Kurt Kuehn, UPS chief financial officer, said they have higher expectations for this year compared to 2013. “While the year ended on a challenging note, we are confident in our ability to adapt and we expect much better results in 2014,” he said.
“UPS expects balanced profitability growth across all segments in a slightly better economic environment, resulting in full-year guidance of diluted earnings per share of $5.05 to $5.30, an 11%-to-16% increase over our 2013 adjusted results,” he added.
Photo: Stephen Cummings