Consultant’s Insight: UPS’ international financials grow for first time in 3 years

After a bruising first half, UPS reported growth in revenue, profit and volume during the third quarter. [caption id="attachment_57145807" align="alignright" width="237"] Cathy Roberson, Cargo Facts columnist[/caption] Today UPS reported $22.2 billion in consolidated revenue, a 5.6% increase from Q3 2023. Consolidated operating profit was $2 billion, up 47.8% year over year. “On our last earnings call , we said that the second quarter would not only be the bottom, but a turning point for our performance and that we would return to revenue and profit growth in the third quarter, which we did,” UPS Chief Executive Carol Tome told analysts on today’s earnings call. Indeed, UPS proved financially successful despite a macroenvironment that was slightly worse than it expected, according to Tome. “In the U.S., online sales slowed and manufacturing activity was lower than we anticipated,” Tome said. “This slowdown in manufacturing activity was also true outside of the U.S. as we continue to see lower industrial production weigh on volume in certain geographies.” However, UPS achieved financial success by cutting costs, raising rates and surcharges, and discounting rates and surcharges for some customers to gain more volume. MD-11F retirement plan UPS owned thirty-one MD-11Fs, as of Sept. 30, according to its latest fleet table. The express carrier noted that the number included two units that it had retired. However, UPS does not anticipate retiring any more MD-11Fs in 2024, the carrier said in its Q3 financial data. At the end of Q2, UPS operated twenty-nine MD-11Fs. UPS began removing its MD-11Fs in favor of new 767-300F deliveries in January 2023, retiring six that year. The carrier began 2023 with forty-four MD-11Fs and ended the year with thirty-eight. UPS had planned to retire nine more MD-11Fs in 2024 but now appears to only be targeting seven retirements. [caption id="attachment_57146316" align="aligncenter" width="2560"] UPS has retired seven MD-11Fs this year. (Photo/Cargo Facts)[/caption] Increased volume, profit UPS generated $2.5 billion in revenue from its health care division during the quarter. However, it did not break out comparison figures from Q3 2023. Internationally, UPS grew revenue and operating profit and expanded its operating margin for the first time in three years. Strength in exports in thirteen of UPS’ top twenty export countries helped drive these improvements, according to Chief Financial Officer Brian Dykes. But a 2.5% increase in revenue per piece, thanks to higher rates and surcharges, also contributed heavily. UPS reported a 1.4% increase in export average daily volume (ADV) and a 0.5% increase in export revenue per piece. All regions reported positive ADV growth, with the Americas up 8% YoY. Among its international accomplishments during the quarter, UPS: Expanded residential Saturday delivery to Belgium, France, Germany, Italy, Netherlands, Poland, Spain and the United Kingdom; Sped up deliveries to more than thirty-five countries across Asia, Africa and the Middle East; and Added more than 200 flights connecting Asia to Europe and the U.S. to meet peak holiday demand . “We’re seeing growth in the expansion of our service out of Asia to Europe and throughout intra-Asia, we’ve made the lane faster [and we see] record fees growing,” UPS Executive Vice President Kate Gutmann, who oversees International, Healthcare and Supply Chain Solutions, said on today’s call. “We feel good about the equation, and we’ll definitely continue it.” Ultimately, it’s all about maintaining revenue quality, and UPS plans to continue with higher rates and surcharges to protect its revenue, at least until manufacturing activity rebounds or UPS has to compete with lower-priced — but equally strong servicing — options.

Consultant’s Insight: UPS’ international financials grow for first time in 3 years

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