UPS Pressured By Rising Costs, Which Are Outpacing Revenue Growth
April 27 2017 - 8:56AM
Dow Jones News
By Joshua Jamerson
United Parcel Service Inc. still has work to do to show that it
can preserve profits amid rising delivery costs, which bit into the
bottom line even as higher rates and surcharges boosted
revenue.
The Atlanta-based company is shipping more packages -- its
average daily package volume rose 4% in the latest quarter -- and
is charging more to do so. Last year it raised rates, adding higher
surcharges for large packages and a new way for calculating fuel
surcharges. Total revenue at UPS rose 6.2%.
But costs are rising at a faster pace. Shipping has become more
expensive, in part because of the added costs of delivering
e-commerce orders to homes. This has put pressure on UPS to try to
keep costs under control by using technology such as
route-optimization software. "We are accelerating investments to
create the industry's leading smart global logistics network and
value-creating portfolio," Chief Executive David Abney said in
prepared remarks Thursday.
Total operating expenses in the quarter jumped 7.4%, denting
profits from several of its segments such as the U.S. domestic
package unit, where operating profit fell 2.4%. UPS was buoyed by a
22% climb in operating profit in its supply chain and freight
division, but company still posted a 2.1% drop in overall operating
profit.
Mr. Abney said that "technology solutions continue to deliver
efficiencies."
Over all, UPS earned $1.16 billion, which is about 2.4% higher
than its year-ago profit of $1.13 billion. The comparison was
helped by a 12.5% smaller income-tax expense in the latest quarter.
On a per-share basis, the company said it earned $1.32. Analysts,
polled by Thomson Reuters, had expected $1.29 a share.
Revenue of $15.32 billion beat analysts projections for $15.17
billion in revenue.
Shares, which have fallen more than 7% in the past three months,
were inactive premarket.
Write to Joshua Jamerson at joshua.jamerson@wsj.com
(END) Dow Jones Newswires
April 27, 2017 08:41 ET (12:41 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
United Parcel Service (NYSE:UPS)
Historical Stock Chart
From Apr 2024 to May 2024
United Parcel Service (NYSE:UPS)
Historical Stock Chart
From May 2023 to May 2024