UPS Rides E-commerce Surge to 21% Jump in Package Volumes
July 30 2020 - 7:13AM
Dow Jones News
By Paul Ziobro
United Parcel Service Inc. rode a pandemic fueled surge in
e-commerce to higher profits and a 13% jump in revenue during the
June quarter, underscoring how the illness upended daily life.
The delivery giant said its average daily shipping volume rose
21% in the quarter, faster than the company has ever recorded, with
a 65% increase in shipments to homes.
"Our results were better than expected, driven in part by the
changes in demand that emerged from the pandemic," said UPS's new
chief executive, Carol Tome.
Shares rose more than 9% in premarket trading.
UPS and rival FedEx Corp. are being inundated with millions of
extra daily packages after many retail stores were temporarily
closed, pushing people to shop online for everything from toilet
paper to pet food. Even as most stores have reopened, some shoppers
remain reluctant to head to stores as coronavirus cases rise in
parts of the U.S.
UPS has benefited from handling packages for Amazon.com Inc.
after FedEx cut ties with the e-commerce giant last year.
UPS said it also had an increase in Covid-19 related health-care
shipments and an increase in outbound packages from Asia.
The sudden growth comes at a cost, though, as the carriers incur
greater expenses from more miles driven and fewer packages
delivered per stop as they deliver more to homes instead of
businesses.
Despite the surge of packages in the U.S., UPS's operating
profit fell slightly in its main domestic segment. UPS's average
revenue per package in the U.S. dropped 5% from a year ago.
Both UPS and FedEx are trying to offset some of the costs with
new surcharges on large packages and on some of their lower-priced
shipping services. The two companies have also started to impose
higher rates on some of their shippers whose volumes have changed
significantly in recent months.
Investors have been looking for signs that the carriers would
start to wield their greater pricing power and extract to see
higher returns from billions of dollars of investment in recent
years on upgrading their networks with added capacity and more
automation. The pandemic has sped up the timeline under which that
was expected to occur amid the significant shift to online shopping
in just a matter of weeks.
For the period, UPS reported a profit of $1.8 billion, or $2.03
a share, up from $1.7 billion, or $1.94 a share, a year earlier.
Excluding some restructuring charges, UPS said adjusted earnings
were $2.13. Revenue hit $20.3 billion. Analysts polled by FactSet
expected UPS to post earnings of $1.07 a share, on revenue of $17.5
billion.
(END) Dow Jones Newswires
July 30, 2020 06:58 ET (10:58 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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