UPS Profit Falls Amid Higher Costs
October 26 2017 - 9:24AM
Dow Jones News
By Allison Prang
Earnings at United Parcel Service Inc. fell slightly for the
third quarter as higher costs from expanding Saturday package
delivery and recent natural disasters weighed on its U.S.
business.
The results come just a day after the company announced it would
increase U.S. shipping rates as it attempts to recoup the higher
costs associated with e-commerce shipments. The rate hike, which
could come as welcome news for investors waiting for UPS to better
compete on pricing against FedEx Corp., are slated to go into
effect Dec. 24.
Similar to how brick-and-mortar retail has struggled with the
demise of physical storefronts, the consumer shift toward online
shopping has also affected shipping companies like UPS that are
tasked with making deliveries to people's homes that, in comparison
to large store shipments, are more expensive.
UPS, which has raised prices in the past, also announced in June
it was increasing its holiday shipping costs. FedEx, one of UPS's
main competitors, has increased prices, but isn't going to apply a
holiday price hike for most of its shipments.
Net income at UPS for the third quarter was $1.26 billion, or
$1.45 a share, down 0.7% from the year-ago period. Both metrics
were in line with analysts' expectations. The company's earnings
report also follows a torturous hurricane season that disrupted the
shipping industry in multiple U.S. states.
Shares in UPS were down 0.6% to $117.87 in premarket
trading.
Revenue excluding currency impacts rose by 7% to $15.98 billion.
Analysts were predicting revenue of $15.62 billion. Operating
expenses were $13.94 billion, up 8.1%.
Average revenue per shipment excluding currency impacts rose
2.8% to $10.78. Due to Hurricane Maria, for the bulk of this month
UPS cut ground shipping rates for parcels going from the U.S. to
Puerto Rico and other places by 35%.
Revenue excluding currency costs from the company's
international business grew at a 12% clip, faster than its domestic
segment growth of 3.9%. The company gets about 60% of revenue from
its domestic operations.
Supply chain and freight revenue excluding currency impacts rose
by 13% to $2.97 billion.
In addition to higher costs associated with e-commerce, UPS and
its competitors could be negatively affected further by companies
like Amazon.com Inc., which is testing a delivery service called
Seller Flex where it would deliver goods from sellers to
buyers.
For the full year, UPS now expects adjusted per-share profit to
be between $5.85 and $6.10, compared with its prior guidance of
$5.80 to $6.10.
Write to Allison Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
October 26, 2017 09:09 ET (13:09 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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