Next-day shipping is padding the company’s profits.
UPS shares jumped by nearly 9% on Wednesday after the shipping company’s second-quarter revenue handily beat Wall Street’s expectations.
Some of the key points from the Q2 earnings report include:
- $1.96 earnings per share (EPS)
- $18.048 billion in revenue
- U.S. operating profit increased nearly 29%
- Supply chain and freight operating profit increased nearly 26%
- Adjusted free cash flow near $2.2B
For comparison, analysts at Refinitiv expected an EPS of around $1.92 and $17.966 billion in revenue.
UPS also expects a full-year EPS in the range of $7.45 to $7.75.
In a statement accompanying the earnings report, CEO and Chairman David Abney said, “Our Transformation initiatives are generating greater efficiencies across the network and, when combined with our growth strategies, UPS achieved profit growth in all segments.”
What’s Behind the Revenue Spike?
UPS attributes much of its recent growth to the increased demand of its next-day shipping services. UPS Next Day Air volume increased by over 30%, largely due to the needs of e-commerce shippers.
“Demand for faster delivery is a structural change in our industry,” said Abney. “Anticipating this change, our additional air capacity and modernized network enabled this growth to have a positive impact on profitability and positions UPS well to serve the growing needs of the market.”
Thanks to the success of the company’s next-day shipping services, revenue rose by 3.4%.
Expanding Delivery Services
UPS has plans to build on the success of its next-day shipping services.
In the earnings report, Abney highlighted the company’s plans to roll out several new products and services, including UPS My Choice for Business, expanded UPS Access Points, and UPS Worldwide Economy.
UPS also announced plans to start delivering seven days per week. The company is also seeking approval from the FAA to complete deliveries via drones in certain circumstances.
These additional services could be enticing to e-commerce shippers that are a large source of business for UPS.
With plans to roll out products and services designed to generate additional profitable growth, UPS hopes to capitalize on the new changes in the shipping industry.
