UPS 3Q volumes up across the board

UPS reported third-quarter net income up 10.7% y-o-y to $1.21 billion as total revenue rose 5.7% to $14.29 billion. Operating profit for the quarter was up 8.3% to $1.95 billion.

The chart at right shows the company’s financial and operational results for both the third quarter and the year through 30 September. What jumps out at first glance is that average daily package volumes are up for every product in both the International and US Domestic express segments. And not just up, but up significantly, with volumes for every product except US Next Day Air up more than 5%, for an overall 6.9% increase.

UPS said the gains in US Domestic volume were driven by e-commerce, particularly strong B2C growth, although B2B deliveries were also up in the quarter. In the International Package segment, volume growth was led by a 9.4% increase in Export shipments, while International Domestic shipments were up 5.0%

For most of the express products, per-package yield fell slightly, but the volume gains more than compensated, and revenue was up for all express products, and up more than 5% overall. Operating margin was up 30 basis points to 14.7% in the US Domestic segment, and up 70 points in the International Package segment to 14.5%

The Supply Chain & Freight segment also reported solid performance, with operating profit up 7.0% to $215 million, as revenue rose 7.4% to $2.42 billion. UPS said the gains resulted primarily from growth in the Distribution and UPS Freight business units.

Freight forwarding revenue was up 7.4% on the back of increased international tonnage, which was “aided by high-tech product launches and Government sector gains.” However, UPS pointed out that operating profit improvements in North American air and ocean forwarding were more than offset by continued pricing pressure in international air freight. Operating margin in the Supply Chain & Freight segment was 8.9%

Looking ahead to the upcoming holiday shopping season, UPS said it expected shipment volume in December to be up 11% over last year. As most readers will remember, last year’s holiday season is one that UPS and FedEx would probably like to forget, as both companies were overwhelmed with last minute demand. To some extent this was beyond their control, as retailers made impossible promises to their customers, but UPS says it has committed and additional $175 million in operating expense and $500 million in capital expenditures “to enhance its capabilities and prepare the network for peak and future volume growth.”

For the first three quarters of 2014, UPS reported adjusted net income up 2.4% to $3.24 billion, as revenues rose 4.6% to $42.34 billion. Operating profit for the year to date was up 2.2% to $539 million