· 3Q18 EPS of $1.73, up More Than 20%; Adjusted EPS up 26% to $1.82
· U.S. Domestic Revenue up 8.1% on Growth and Accelerating Yields
· International Currency-Neutral Revenue Grew 5%, with Gains in all Regions
· International Year-Over-Year Comparisons Affected by Headwinds from Currency and Fuel
· Supply Chain & Freight Operating Profit up 24%; Adjusted Operating Profit Jumps 33%
· YTD Cash from Operations was $9.4B and Free Cash Flow was up to $4.9B
· Raising Free Cash Flow Guidance to Over $5B and Reaffirming Adjusted EPS
ATLANTA UPS (NYSE:UPS) today announced third-quarter diluted earnings per share of $1.73, up more than 20%, and adjusted, diluted earnings per share of $1.82, up 26%.
Third-quarter adjusted results exclude a pre-tax charge of $97 million, or $0.09 per share after tax, due to transformation-related costs. These projects are a part of the company’s transformation initiatives that will create efficiencies across the enterprise. Transformation will also produce higher-quality revenue growth.
| Consolidated Results |
3Q 2018 |
Adjusted 3Q 2018 |
3Q 2017 |
| Revenue |
$17,444 M |
$16,173 M |
|
| Net Income |
$1,508 M |
$1,581 M |
$1,259 M |
| Diluted Earnings Per Share |
$1.73 |
$1.82 |
$1.44 |
| EPS Growth |
20.1% |
26.4% |
“Our business strategies position UPS to improve operating leverage and many of our actions are already contributing to performance gains,” said UPS Chairman and CEO David Abney. “We generated another quarter of industry-leading margins and strong free cash flow and we are confident in the outlook for the business.”
For the company in 3Q 2018:
· Consolidated revenue increased 7.9% and currency-neutral revenue was 8.4% higher.
· Average revenue yield increased 4.0%, with base-pricing gains in all product categories.
· Year-to-date cash from operations expanded to $9.4 billion.
· Free cash flow increased to $4.9 billion through the first nine months of the year.
· Year-to-date dividends per share increased by 10%, producing an annual dividend yield in excess of 3%.
· The company repurchased 6.6 million shares year-to-date for approximately $750 million.
· Capital investments and associated efficiencies were as expected in the quarter with year-to-date expenditures at $4.5 billion.
· Third quarter results benefited from several discrete items, including tax that helped to offset unplanned International headwinds from currency and fuel.
U.S. Domestic Segment
The U.S. Domestic segment experienced strong revenue growth of 8.1% to $10.4 billion, driven by high demand for the company’s solutions and robust yield expansion compared to 3Q 2017. The segment also generated sequential yield improvements driven in part by a more disciplined approach to capture high-quality growth opportunities.
|
3Q 2018 |
Adjusted 3Q 2018 |
3Q 2017 |
|
| Revenue |
$10,437 M |
$9,651 M |
|
| Operating profit |
$949 M |
$988 M |
$1,011 M |
For the U.S. Domestic segment in 3Q 2018:
· Revenue, volume and revenue per piece increased across all products in the quarter.
· Daily shipments increased 3.3%, led by Next Day Air and Ground products.
· Ground revenue per piece increased by 5.1% over the prior year.
· Operating profit was reduced by planned increases in pension expense and the cost of ongoing network improvements.
· Adjusted operating profit excludes transformation charges of $39 million.
International Segment
International segment revenue increased in all regions compared to the same period last year, on both a reported and currency-neutral basis. Export volume also increased across all regions and exports grew nearly 3% on top of 19% growth last year. Year-over-year comparisons are affected by the strong 3Q 2017 growth UPS experienced in Europe.
|
3Q 2018 |
Adjusted 3Q 2018 |
3Q 2017 |
|
| Revenue |
$3,478 M |
$3,376 M |
|
| Operating profit |
$536 M |
$576 M |
$606 M |
For the International segment in 3Q 2018:
· Revenue increased 3%; on a currency-neutral basis, revenue increased 5%.
· Europe export volume grew 4.2% on top of the 25% growth in 3Q 2017.
· Yield increased 3.0% and currency-neutral yield jumped 5.1%, driven by revenue management actions and improved product mix.
· Operating profit includes headwinds primarily from currency and fuel, as well as some economic softening related to changing trade policies.
· Currency was a negative impact of $28 million, primarily from emerging markets.
· Adjusted operating profit excludes transformation charges of $40 million.
Supply Chain and Freight Segment
“Supply Chain and Freight performance was outstanding this quarter, as the unit delivered double-digit growth in both revenue and adjusted operating profit,” Abney said. “UPS will continue to leverage our vast forwarding, customs, and supply-chain solutions to help customers expand their existing businesses and reach new markets.”
|
3Q 2018 |
Adjusted 3Q 2018 |
3Q 2017 |
|
| Revenue |
$3,529 M |
$3,146 M |
|
| Operating profit |
$242 M |
$260 M |
$195 M |
For the Supply Chain and Freight segment in 3Q 2018:
· Revenue increased more than 12% to $3.5 billion, as the business units benefited from strategies focused on small and medium-sized customers.
· The Forwarding business led all units with 17% revenue growth, as revenue management initiatives and high-value solutions generated yield improvement.
· UPS Freight revenue increased 11% on higher pricing and heavier shipments.
· Third quarter operating margin was 6.8%; adjusted operating margin expanded 120 basis points to 7.4%.
· Operating profit was up 24% to $242 million and adjusted operating profit increased 33% to $260 million.
· Adjusted operating profit excludes transformation charges of $18 million.
Outlook
The company provides earnings per share guidance on an adjusted (non-GAAP) basis because it is not possible to predict or provide a reconciliation reflecting the impact of future required pension mark-to-market adjustments, which would be included in reported (GAAP) results. The impact of such adjustments could be material.
“Improvements in revenue quality and our new, highly-automated capacity gives us confidence in a successful peak season for our customers and shareowners”, said Richard Peretz, UPS’s chief financial officer.
· UPS expects 2018 adjusted, diluted earnings per share in a range of $7.03 to $7.37.
· The company is raising free cash flow guidance to over $5.0 billion in 2018.
· Capital expenditures in 2018 remain planned between $6.5 billion and $7.0 billion.
· As previously guided, UPS expects 4Q18 adjusted EPS to increase about 15 percent, despite anticipated currency headwinds in emerging markets and one less operating day during peak season.
· The effective tax rate should be in a range of 23% to 24% for the fourth quarter.
Conference Call Information
UPS CEO David Abney and CFO Richard Peretz will discuss third-quarter results with investors and analysts during a conference call at 8:30 a.m. ET (14:30 CET), October 24, 2018. That call is open to others through a live Webcast. To access the call, go to www.investors.ups.com and click on “Earnings Webcast.”
