UPS Q4 revenues boosted by Amazon gains

UPS saw fourth-quarter revenues soar on the back of Amazon volume growth, but pensions charges pushed the company to a loss.

The express giant reported a 3.6% year-on-year increase in revenues for its fiscal fourth quarter to $20.6bn, operating profit was up by 6.4% to $2.1bn but it reported a $106m loss against a $453m profit last year.

The loss came as the company incurred a pension charge of $1.8bn, while other charges totaled $130m.

“Our network improvements from transformation enabled UPS to embrace a surge in demand for air products while at the same time generate productivity improvements and positive operating leverage,” said David Abney, UPS chairman and chief executive.

“Looking to 2020, we will continue to adapt to the changing environment, strengthen our network and create new solutions to support our strategic growth initiatives and help our customers grow and compete.”

Drilling down into the performance of UPS’ different segments, US domestic saw fourth-quarter revenues increase by 6.5% year on year to $13.4bn, while operating profit increased 7.5% to $1.1bn.

UPS said the segment benefited from several transformation initiatives, including increased automated capacity and new aircraft added to its fleet, which positioned UPS to “handle volume growth in each month of the quarter”.  

Growth was driven by the structural shift to faster delivery in retail and e-commerce, and from competitive wins, the company said.

UPS experienced growth from a number of large and small/medium business (SMB) customers, with the increases led by UPS’s largest customer, Amazon.

Meanwhile, the UPS international segment reported a small decline in revenues to $3.8bn and operating profit was up 2.3% to $799m.

“The International segment delivered higher profit and expanded operating margin, adapting well to the dynamic macro environment,” UPS said.

“Strong execution, cost management and a strategic focus on market and e-commerce opportunities enabled the solid performance for the quarter.”

Finally, the supply chain and freight business saw revenues decline by 1.3% year on year to $3.4bn but operating profits improved by 16.1% to $260m.

“Supply Chain and Freight produced strong profit growth in the quarter,” UPS said “The segment also expanded operating margins driven by disciplined cost management actions and continued focus on growing its SMB customer base.”

“UPS managed through several challenges in 2019, including declines in industrial production,” said Brian Newman, UPS’s chief financial officer.

“We were able to leverage the capital investments we have made to grow profits and expand margins, and we are fast-tracking our initiatives in 2020 to better position UPS to capitalize on structural changes in the market and growth opportunities.”