(Bloomberg) – United Parcel Service Inc. hit a record when the courier service beat Wall Street expectations thanks to demand from the pandemic era for Asian e-commerce, healthcare equipment and product deliveries.
Revenue rose 13% to $ 20.5 billion in the second quarter, beating analysts’ highest estimate and confusing predictions that sales would fall. Adjusted earnings rose to $ 2.13 per share, the company said in a statement Thursday. That was about twice the average of the estimates compiled by Bloomberg.
UPS managed to “smash high expectations about the volume increase,” JPMorgan Chase & Co. analyst Brian Ossenbeck said in a note to clients. “Package carriers have a unique opportunity to increase price as demand has never been so high for delivery services.”
UPS and FedEx Corp. have been in overdrive to handle the high residential deliveries while bringing personal protective equipment to hospitals since the new coronavirus swept the world this year. Both companies applied high-season-style surcharges to large clients as demand increased and new expenses emerged to protect employees and keep the classification centers virus-free.
UPS soared 10% to $ 136.33 at 9:40 a.m. in New York after rising to $ 138.79, an intraday record. UPS advanced 5.7% this year through Wednesday, while the S&P 500 was up less than 1%.
New CEO
The average volume of courier service in the US increased 23% to 21.1 million packages per day in the second quarter. That was primarily driven by a 65% increase in residential deliveries.
The gains were driven by “the changes in demand that emerged from the pandemic, including an increase in residential volume, Covid-19-related healthcare shipments and strong outgoing demand from Asia,” Executive Director Carol Tomé, who took the reins on June 1. she said in the statement.
Still, the increase in home deliveries weighed on the adjusted internal profit margin, which fell to 9.3% from 11% the previous year. This is because the residential service has fewer packages per stop than the commercial one and requires drivers to travel more between locations.
“In the future, we are focusing on efficiency and revenue quality to improve US operating margins in the long term,” said Brian Newman, chief financial officer of UPS.
UPS declined to provide guidance on income or earnings due to the uncertainty surrounding the timing and pace of the economic recovery as companies begin to reopen.
Tomé inherited a company that is in good shape to handle rising demand after its predecessor, David Abney, stepped up investment in recent years to build automated sorting centers, buy new aircraft, and develop technology for routing packages smoothly. more efficient. Abney will resign as chief executive on September 30.
UPS also did well in the highly profitable international segment, with sales increasing 5.7% from a year earlier to $ 3.71 billion and operating profit that jumped 27% to $ 842 million. The revenue was driven by strong demand for Asia’s exit and an increase in Europe’s cross-border e-commerce, UPS said.
FedEx also received a boost from pandemic-related demand and saw revenue soar 20% at its US ground delivery unit during the fiscal quarter ended May 31. accelerated from May.
(Update the actions in the fifth paragraph).
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