United Parcel Service, Inc. (UPS) barely signed, sealed and delivered with its third-quarter earnings. Done. Without missing a beat, it's now in holiday mode.
The delivery company posted earnings of $1.45 per share in the three months ending on Sept. 30, nailing analyst projections of $1.45 according to Factset. UPS exceed Wall Street's estimate for total revenue, however, for which it reported nearly $16 billion compared to the estimated median of $15.62 billion.
UPS reported a total profit of $2.03 billion, nearly identical to the same period last year. Although revenue jumped 7%, the company saw scant growth. Margins have diminished—its net income as percentage of revenue decreased from 8.5% in 2016 to 7.9% this year.
Bright spots exist. Next-day delivery, for instance, was up 8%. For the coming holiday season, it expects to make a record 750 million deliveries worldwide. UPS CFO Richard Peretz told TheStreet the company believes it's ready for the holiday rush after a year of capacity investments.
To oblige its customers, UPS said during the earnings call Thursday, Oct. 26, that it has upped delivery capacity through facility expansion. It added 1 million square feet of space for the peak season in locations like Los Angeles and Chicago, according to Kate Gutmann, the chief sales and solutions officer, and will also kickstart Saturday operations.
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CEO David Abney said Hurricanes Harvey and Irma hurt business. Lost operations and facility construction amount to damages of $90 million in operating profit.
"UPS produced another solid quarter of financial performance, despite the impact of several
natural disasters that slowed regional economic activity and damaged infrastructure," he said in a statement. "Our business segments adapted quickly to changing conditions this quarter, taking advantage of market opportunities, while minimizing cost and service disruptions from recent events."
UPS has paid dividends of nearly $2.1 billion, as well as $1.4 billion in repurchasing shares. Its stock is down nearly 1% Thursday, Oct. 26, following the earnings release and an announcement that it will increase shipping rates by 4.9% after the holiday season and add a peak surcharge next year.
The surcharge for UPS Next Day Air packages, for instance, will rise to 84 cents next year from 81 cents. Ground packages will have have a surcharge of 28 cents, up from 27 cents this year. Its competitor, FedEx Corp. (FDX) , does not have seasonal surcharges. UPS said the surcharges will cover the expense of hiring 95,000 seasonal workers for the upcoming holidays.
Despite this quarter's setbacks, "forecast for the coming months have an optimistic outlook that should bode well for B-to-B (business-to-business) demand," Abney said in the earnings call. "We see further upside potential from U.S. tax reform, which we strongly support."
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