UPS sees growth accelerate in 2017

01 / 02 / 2018

Express giant UPS saw both revenues and profits accelerate last year, with the improved performance led by its supply chain and freight division.

In total, UPS saw revenues for 2017 increase by 8.2% year on year to $65.9bn, while operating profits were up 37.7% on 2016 to $7.5bn and net income improved by 43.1% to 4.9bn.

For the fourth quarter, revenues were up 11.2% to $18.8bn, operating profit reached $1.5bn compared with a $428m loss last year and net income stood at $1.1bn against a $239m loss.

“We achieved our 2017 adjusted earnings-per-share target through exceptionally strong revenue and yield growth, coupled with benefits from our network investments and portfolio initiatives,” said David Abney, UPS chairman and chief executive.

“We made significant progress on key capacity investments in 2017. Our momentum, transformative actions and the economic catalyst from the Tax Cuts and Jobs Act (TCJA), position UPS for growth in 2018 and beyond.

“We expect to unlock significant resources, which will be available for accelerated investments in our network and create additional opportunities for our people.”

Looking at its various divisions, the US domestic business saw revenues increase 8.4% in the fourth quarter to $11.8bn and operating profit reached $627m compared with a $570m loss last year.

This was down to higher base rates and fuel surcharges and volume increases.

Shipments surged beyond network capacity during Cyber-periods driving additional operating cost of $125m, while Saturday operations provided additional capacity and flexibility during the quarter.

Operating profit includes additional expense from investments in new technology, customer solutions and automated capacity expansion of about $60m.

The international segment saw fourth-quarter revenues improve by 13% on a year earlier to $3.7bn and operating profit reached $725m, up 158%.

Improvements were driven by export shipment increases and premium products.

Finally, the supply chain and freight business registered a 20.8% increase to $3.2bn and operating profits improved from a $139m loss to a $142m profit.

Revenues improvement was the result of “deeper alignment with preferred customers, strengthened revenue management initiatives and improved market conditions”.

Tonnage improvements in freight forwarding, UPS Freight and Coyote Logitsics.

Looking ahead, the company is positive for 2018.

“Our growth opportunities are accelerating,” said Richard Peretz, UPS chief financial officer. “The strong economic outlook and UPS’s high return on invested capital generates a unique opportunity to create additional long-term value by increasing capital investments.

“These investments enable UPS to execute our strategy and we are well-positioned for 2018 and beyond.”

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