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Third-quarter consolidated revenues of US$24.2 billion, up 4.2% from last year
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Consolidated operating profit of $3.1 billion, an increase of 7.5% y-o-y and up 6.0% on an adjusted basis
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Diluted earnings per share of $2.96; adjusted diluted EPS up 10.3% y-o-y to $2.99
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Reaffirms FY2022 consolidated revenue, adjusted operating margin and adjusted return on invested capital targets
United Parcel Service posted third-quarter 2022 consolidated revenues of US$24.2 billion, up 4.2% year-on-year driven by “growth in revenue per piece” that keeps the company on profit track this year.
UPS said the results put it on course to achieve its financial targets in 2022, but at least on analyst is skeptical, saying the revenue increase came from raising prices to make up for shrinking ecommerce demand.
UPS’ competitor DHL has reported strong results so far this year, partly driven by phenomenal growth in e-commerce in its home base, Germany, in recent years, driven in particular by mobility issues at the height of the COVID pandemic.
Dark clouds are looming on the horizon, with UPS’ rival Federal Express withdrawing in September its forecasts for its fiscal first quarter in after its unit FedEx Express’ preliminary results showed a revenue shortfall of $500 million.
Macroeconomic weakness in Asia due mainly to US dollar strenght pushing up prices, manufacturing disruptions in China caused by pandemic-related lockdowns and service challenges in Europe that spooked FedEx have yet to reflect on the results of other couriers.
For UPS, consolidated operating profit was $3.1 billion, up 7.5% compared with the third quarter of 2021, and a 6.0% y-o-y increase on an adjusted basis. Diluted earnings per share were $2.96 for the quarter; adjusted diluted EPS of $2.99 were 10.3% above the same period in 2021.
The third-quarter 2022, results based on generally accepted accounting and auditing principles (GAAP), included after-tax transformation and other charges of $27 million, or $0.03 per diluted share.
“I want to thank UPSers around the world for their unstoppable spirit and for continuing to deliver outstanding service to our customers,” said chief executive Carol Tomé, announcing the results from the UPS headquarters in Atlanta, Georgia, on October 25.
“The macro environment is very dynamic, but we are on track to achieving our 2022 financial targets by executing our strategy and controlling what we can control.”
In the US domestic segment, UPS reported unadjusted revenue of $15.37 billion, growing 8.2% y-o-y, on the back of a 9.8% increase in revenue per piece. That produced unadjusted operating profit of $1.67 billion and adjusted operating profit of $1.69 billion for the segment. Operating margin was 10.8% while adjusted operating margin was 11.0%.
Transport Intelligence analyst Thomas Cullen said UPS’ results were more or less in line with the trends seen over the past year or so, with declining volumes but hardening prices leading to higher profits.
“UPS’ core US Domestic Express business average daily volumes declined 1.5% over the quarter, led by a 2.2% fall in ‘business-to-consumer’ (B2C) consignments, illustrating that e-commerce is still shrinking,” Cullen said.
He pointed out that UPS said made up for declining B2C volumes by increasing prices, which drove up revenue 8.2% to US$15.4 billion. But costs “dampening down” operating profit growth allowed just an increase of $259 million, to $1.666 billion, Cullen said.
UPS said its Supply Chain Solutions segment reported unadjusted revenue of $3.99 billion for the quarter, resulting in unadjusted operating profit of $450 million and adjusted operating profit of $459 million.
Revenue decreased 6.3% due to declines in air and ocean freight forwarding, partially offset by growth in UPS’ logistics and healthcare businesses, the company said. Unadjusted operating margin was 11.3% while adjusted operating margin was 11.5%.
Cullen said the results “confirm that the markets in general are slowing. Much of the reasons for sustained profitability at UPS lie in good operational management. The demand picture is softening, or, as Carol Tome…described it, ‘the macro environment is very dynamic’.”
For its 2022 outlook, UPS reaffirmed its consolidated revenue targets of around $102 billion, an adjusted operating margin of about 13.7% and adjusted return on invested capital above 30%.
UPS expects capital expenditure of around $5 billion and plans to pay $5.2 billion in dividends subject to board approval, and buy back shares of at least $3 billion.
