UPS profit beats as pandemic drives healthcare, e-commerce shipments

FILE PHOTO: United Parcel Service employee Marion Smith loads packages at the UPS Worldport International Hub in Louisville, Kentucky, U.S. August 15, 2016. REUTERS/John Sommers II

(Reuters) – United Parcel Service Inc <UPS.N> exceeded analyst estimates for profit and revenue on Thursday as lucrative healthcare and air shipments helped offset a margin squeeze from surging e-commerce home deliveries, sending shares up 11.5%.

The novel coronavirus pandemic is driving more shipments in everything from face masks and medical equipment to food and furniture.

UPS is raising prices, containing costs and investing in projects to speed up service as it manages economic uncertainty – particularly in the United States, where COVID-19 deaths are spiking, unemployment benefits could shrink, and a presidential election looms in November.

“The fact that margins compressed so little on 65% growth in residential deliveries is encouraging. The company did much better than (Wall) Street was expecting adjusting the network to more residential demand,” Bernstein analyst David Vernon said.

UPS shares jumped 10.6% to $136.82 in early trading. The stock is up roughly 6% this year, outperforming the 9% decline in the Dow Jones Transports index <.DJI>.

The report was the first from UPS Chief Executive Carol Tomé, who took the helm at the world’s biggest package delivery firm on June 1. She is the first outsider to lead UPS in its more than 100-year history.

Average daily volumes in the United States jumped 22.8% to 21.1 million daily packages during the second quarter.

That came at a cost, since dropping packages on doorsteps is less lucrative than delivering to businesses as it requires more truck miles and stops per route.

Amazon.com Inc <AMZN.O>, its largest customer, drove much of that growth.

UPS also grabbed more air cargo from Asia, in part due to rival FedEx Corp’s <FDX.N> split with Amazon last summer. Rates for air cargo were sky-high in the second quarter.

Atlanta-based UPS said net income rose 4.9% to $1.77 billion in the quarter. Excluding items, it earned $2.13 per share, beating estimates of $1.07 per share.

Revenue grew 13.4% to $20.46 billion, beating estimates for $17.48 billion, according to IBES data from Refinitiv.

(Reporting by Sanjana Shivdas in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Amy Caren Daniel and Bernadette Baum)

Leave a Reply