Shares of United Parcel Services Inc. soared to their best day ever on Thursday as surprisingly strong consumer demand in the face of the COVID-19 pandemic offset the weakness in business demand and helped prepare the giant for delivering packages for the upcoming peak shopping season.
Christmas came early for UPS and its investors as Chief Financial Officer Brian Newman said US volumes rose significantly from the April lows to reach “highs” in May and June.
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“At the beginning of the second quarter, we assumed that demand would slow down. Instead, we saw just the opposite. ”
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UPS stock,
it shot 14.4% to close at a record close of $ 141.46, well above its previous record of $ 134.09 on January 12, 2018. That was the largest one-day percentage gain since it went public in November 1999, beating the previous record of 13.1% recovery on October 19, 2000.
UPS shares have risen 20.8% so far this year, while rival shares in rival FedEx Corp. FDX,
They have advanced 14.2%, the Dow Jones Transportation Average DJT,
has lost 9.1% and the DIA Jones Industrial Average DJIA,
it has decreased 7.8%.
Before Thursday’s opening, UPS reported net income that increased to $ 1.77 billion, or $ 2.03 per share, from $ 1.69 billion, or $ 1.94 per share, in the same period last year. Excluding non-recurring items, such as a $ 112 million transformation fee, adjusted earnings per share increased to $ 2.13 from $ 1.96, almost double the FactSet consensus of $ 1.07.
Total revenue grew 13.4% to $ 20.46 billion, well above the FactSet consensus of $ 17.50 billion, as revenue from the U.S. domestic package increased 17.3% to $ 13.07 billion to exceed expectations of $ 11.15 billion.
“At the beginning of the second quarter, we assumed that demand would slow down,” new CEO Carol Tomé said, according to a FactSet transcript of the post-earnings conference call with analysts. “Instead, we saw just the opposite.”
Well, Tomé, who succeeded David Abney to become CEO on June 1, after 17 years as a board member, was partly right.
The recession in the industrial sector caused by the pandemic caused a 21.9% drop in business-to-business (B2B) volume, but showed some signs of improvement as the quarter progressed. B2B shipments accounted for 27% of total volume in early May, but grew to 37% of total volume in late June. In comparison, B2B volume was approximately 46% of the total in 2019.
The real star was the consumer, as B2C volume shot up 65.2%, equivalent to 5.8 million additional pieces delivered per day, and accounted for 69% of total volume, with an increase in residential volume on land of 63.8%.
See related: FedEx and UPS shares rise as investors cheer on the news that Amazon is stopping the competition’s service test.
FactSet, MarketWatch
What helped UPS meet this increased demand was adding nearly 40,000 new employees to its small package business in recent months, flying around 635 additional flights, and increasing its e-commerce market capabilities as UPS added 120,000 new customers. through its digital access program.
“There are no complaints here, just a great quarter,” said Cowen analyst Helane Becker. “No prospects are offered, but we expect a continuation of similar trends in 3Q20.”
For the rest of the year, Tomé said it was difficult to know how B2B demand would develop, especially given the recent jump in new COVID-19 cases, new containment measures, and uncertainty regarding fiscal stimulus programs. However, she expects B2C demand to remain “strong” in the holiday season.
“As a leadership team, we agree that we are going to have an exceptional peak season,” said Tomé on the analysts’ call. “I participated in my first peak planning committee several weeks after joining the company, and I was very impressed with how we planned to manage what could be a very peak season.”
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