UPS Earnings Per Share Rise 14 Percent on 8 Percent Revenue
Press Release
U.S. Domestic and Supply Chain & Freight Lead the Way; Free Cash Flow Exceeds $3.7 Billion
Atlanta, October 25, 2011 - UPS (NYSE: UPS) today announced diluted earnings per share of $1.06 for the third quarter of 2011, a 14% improvement over the adjusted $0.93 for the prior-year period. Total revenue increased 8% to $13.2 billion.
The results were driven by the U.S. Domestic and Supply Chain & Freight segments. U.S. Domestic operating margin improved to 13.1% compared to last year's adjusted results and Supply Chain and Freight operating profit increased more than 10%. Free cash flow for the first nine months of the year was strong, exceeding $3.7 billion.
On a reported basis, diluted earnings per share increased 7.1% over the same quarter last year. In the prior-year period, the company recorded an after-tax benefit of $61 million from the sale of real estate.
"UPS produced another solid quarter of earnings growth against the backdrop of a deceleration in exports from Asia and a challenging global economic environment," said Scott Davis, UPS chairman and CEO. "The resilience of our global model was evident during the quarter and we remain confident in our ability to perform in both good and bad economies."
Adjusted
Consolidated Results
3Q 2011
3Q 2010
3Q 2010
Revenue
$13.17 B
$12.19 B
Operating profit
$1.62 B
$1.62 B
$1.51 B
Operating margin
12.3 %
13.3 %
12.4 %
Average volume per day
15.1 M
15.0 M
Diluted earnings per share
$1.06
$0.99
$0.93
During the quarter, UPS delivered 965 million packages, an increase of 0.7% over the prior-year period.
In July, UPS released its 2010 Sustainability Report, highlighting successful fuel conservation efforts. The company reduced miles driven by 63.5 million, resulting in carbon emissions avoidance of 68,000 metric tonnes. During the quarter, UPS also was recognized with the highest score in the 2011 Carbon Disclosure Project's Global Leadership Index.
Cash Position
For the nine months ending Sept. 30, UPS generated more than $3.7 billion in free cash flow after making capital expenditures of $1.6 billion and pension contributions of $1.4 billion.
The company accelerated its repurchase activity during the quarter, acquiring more than $1.1 billion in UPS stock. Year-to-date, UPS has repurchased 31.7 million shares for approximately $2.2 billion and paid dividends totaling $1.5 billion, up 10.6% per share.
Adjusted
U.S. Domestic Package
3Q 2011
3Q 2010
3Q 2010
Revenue
$7.77 B
$7.29 B
Operating profit
$1.02 B
$1.02 B
$0.91 B
Operating margin
13.1 %
14.0 %
12.5 %
Average volume per day
12.74 M
12.73 M
Revenue increased 6.5% and operating profit improved more than 11% over the 2010 third quarter adjusted results. Operating margin expanded 60 basis points to 13.1% due to higher yields, favorable product mix changes and network efficiencies. Total domestic volume growth was flat as a result of the slow U.S. economy; however, UPS Next Day Air volume rose 1.3%.
On a reported basis compared to the third quarter of last year, operating profit decreased slightly and operating margin contracted by 90 basis points.
At the end of the quarter and just in time for the holidays, UPS unveiled a ground-breaking solution for residential deliveries. UPS My Choice enables U.S. consumers to take advantage of the unique delivery options that only UPS can offer. Since the product launch in early October, over 100,000 subscribers have enrolled.
International Package
3Q 2011
3Q 2010
Revenue
$3.06 B
$2.68 B
Operating profit
$409 M
$419 M
Operating margin
13.4 %
15.7%
Average volume per day
2.34 M
2.24 M
Revenue for the segment improved more than 14%, driven by export volume growth of 6.5%. Revenue per piece climbed 9.4% with currency, higher fuel surcharges and base rate increases all contributing.
Operating profit and margin for the segment declined due to excess capacity caused by a deceleration in package volume on the Asia-to-U.S. trade lane. They also were negatively impacted by product mix, higher fuel prices and currency fluctuations.
Last month, the company announced a significant expansion of its European air hub in Cologne, Germany. The $200 million investment will utilize the latest UPS technology to improve efficiency and support continued European growth.
Supply Chain and Freight
3Q 2011
3Q 2010
Revenue
$2.34 B
$2.23 B
Operating profit
$195 M
$177 M
Operating margin
8.3 %
8.0 %
Operating profit for the third quarter climbed more than 10% to $195 million on revenue growth of 5.3% compared to the prior-year period. The operating margin for the segment increased 30 basis points to 8.3%.
UPS Freight drove segment results as operating profit improved and operating margin expanded. On a year-over-year basis, revenue for the quarter jumped approximately 15% on a slight decline in daily shipments. The business also experienced increases in LTL revenue per hundredweight and weight per shipment.
Forwarding revenue experienced downward pressure compared to the same quarter last year due to excess capacity in the air freight industry. Nonetheless, Forwarding expanded operating margin and slightly improved operating profit.
In September, UPS introduced PharmaPort 360, the latest innovation in cold-chain shipping solutions designed specifically for the healthcare industry. This unique temperature-controlled container offers unparalleled shipment monitoring and product protection for pharmaceuticals, vaccines and biologics.
Outlook "We are reiterating our 2011 guidance for UPS adjusted diluted earnings per share to a range of $4.15-to-$4.40," said Kurt Kuehn, UPS's chief financial officer. "UPS continues to deliver strong financial results in today's global economic environment as customers benefit from the logistics solutions that only UPS offers."
