UPS Growth Accelerates In 2017

UPS (NYSE:UPS) today announced fourth quarter 2017 earnings.  “We achieved our 2017 adjusted earnings-per-share target through exceptionally strong revenue and yield growth, coupled with benefits from our network investments and portfolio initiatives,” said David Abney, UPS chairman and CEO.  “We made significant progress on key capacity investments in 2017.  Our momentum, transformative actions and the economic catalyst from the Tax Cuts and Jobs Act (TCJA), position UPS for growth in 2018 and beyond.  We expect to unlock significant resources, which will be available for accelerated investments in our network and create additional opportunities for our people.”

The Domestic segment is transforming its network to take full advantage of structural changes in the direct-to-consumer market.  Demand for UPS Ground rose in the fourth quarter with volume growth of 5.7% and revenue of 9.3%.  Premium Next Day Air shipment growth continued to be strong at 4.9% as customers selected faster delivery options.  However, bottom line results were muted by additional peak operating expenses due to cyber-period volume surges and short-term costs related to capacity projects yet to come on-line.
For the U.S. Domestic segment in 4Q 2017:
◦Revenue increased $922 million or 8.4% over 4Q 2016, driven by Deferred Air and Ground.
◦Revenue per piece increased 2.9%, as higher base-rate pricing and fuel surcharges offset headwinds from customer and product mix.
◦Shipments surged beyond network capacity during Cyber-periods driving additional operating cost of $125 million.
◦Saturday operations provided additional capacity and flexibility during the quarter.
◦Operating profit includes additional expense from investments in new technology, customer solutions and automated capacity expansion of about $60 million.
◦Adjusted operating profit excludes the MTM pension charge.

“Our International segment has generated four consecutive quarters of double-digit Export growth,” said Abney.  “That execution, combined with our growth strategy and the investments we’ve made over the last three-and-a-half years, produced results that exceeded expectations.”
For the International segment in 4Q 2017:
◦The segment reported revenue growth of 13% driven by premium products.
◦Export shipment growth surged 16% per day.  All regions of the world contributed to the expansion.
◦4Q 2017 operating profit was $725 million; 4Q adjusted operating profit increased 7.6% to $760 million, as the result of broad, accelerated growth combined with expanded yields.
◦Adjusted operating profit excludes the MTM pension charge.
◦Currency-neutral operating profit increased 19% on an adjusted basis.
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