UPS hits earnings record in first quarter

UPS earnings per share jumped 13% in the first quarter of 2016, with growth across all main segments of its business. US domestic and international small packages drove the US-based express logistics firm to a record first quarter, with international operating profit up 15% to $574 million.
Total revenue was up 3.2% on the same quarter in 2015, to $14.4 billion, although revenue growth was slowed by lower fuel surcharges and currency exchange rates. On a currency-neutral basis, revenue increased 3.7%.
Chairman and chief executive, David Abney said: “We continue to execute well in all areas of our long-term enterprise strategy. The combination of revenue growth and benefits from our accelerated investments generated strong financial results in the quarter.”
US domestic operating profit increased 7.6% to $1.1 billion, and operating margin expanded 50 basis points to 12.1% while productivity improvements, fostered by new by technology and lower fuel costs resulted in a 1.9% reduction in cost per unit compared to the same quarter in 2015.
Total revenue increased 3.1% over the first quarter of 2015, to $9.1 billion. Average daily package volume increased 2.8% with ground products up 3.3% and next day air up 3.0%.
However, revenue per package declined by 1.3% due to lower fuel surcharges and changes in product and customer mix.
In the international package sector, operating profit jumped more than 15% to $574 million during the quarter, with improved performance from all regions, attributed to disciplined pricing combined with network efficiency gains. 
Revenue was down 1.9%, again due to exchange rate factors; on a currency-neutral basis it was flat compared with the prior year. Daily export shipments increased slightly, growth out of Asia and Europe offsetting declines in US exports. Premium products grew faster than non-premium during the quarter.
Supply Chain and Freight revenue increased by more than 10% to $2.4 billion, mainly due to the acquisition of Coyote Logistics in the third quarter of last year. Operating profit, though better than anticipated, was slightly less than last year as weak market conditions in air freight forwarding and trucking markets weighed on top line growth.  
The forwarding business expanded operating margins through a focus on revenue quality and operating cost reductions.
For the future, UPS chief financial officer Richard Peretz anticipates that revenue management and improved network efficiency will drive operating profit growth. 

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