UPS Reports Strong 2Q Results

*Positive Momentum Continues with 2Q EPS up 6%
*International Achieves 2Q Record as Operating Profit Climbs 11%
*U.S. Domestic and International Operating Margins Expand
*Higher International Exports Driven by Express Products
*Revenue Growth Tempered by Changes in Fuel and Currency
*Affirms Full-Year 2016 EPS Guidance of $5.70 to $5.90

UPS (NYSE:UPS) today announced second-quarter 2016 diluted earnings per share of $1.43, a 6% increase over the same period last year.  International operating profit increased 11% to $613 million, representing the sixth consecutive quarter of double-digit growth.

Total revenue was $14.6 billion, up 3.8% over the same quarter last year.  Revenue growth was reduced by changes in fuel surcharges and currency exchange rates.  On a currency-neutral basis, revenue increased 4.0%.  Lower fuel surcharge rates reduced revenue growth by approximately 120 basis points.

“We are investing to expand our global network, implementing new technologies and capturing new revenue in high-growth markets,” said David Abney, UPS chairman and CEO. “These strategic investments in our diversified business again this quarter generated strong value for our customers and shareowners.”

Cash Flow
For the six months ended June 30, UPS generated $4.7 billion in cash from operations and $3.7 billion in free cash flow after making capital expenditures of $1.0 billion.  The company paid dividends of about $1.3 billion, an increase of 6.8% per share over the same quarter in 2015.  UPS also repurchased 13.3 million shares for approximately $1.3 billion.

U.S. Domestic Package
U.S. Domestic operating profit increased to $1.2 billion and operating margin expanded 10 basis points to 13.7%.  Productivity improvements bolstered by technology, combined with lower fuel costs, resulted in a 0.2% reduction in cost per unit compared to the same quarter in 2015.

Total revenue increased 2.4% over the second quarter of 2015, to $9.0 billion.  Average daily package volume increased 2.5%, with Next Day Air up 5.6% and Ground products up 2.4%.  Strong business-to-consumer (B2C) growth trends continued this quarter, outpacing business delivery growth more than five to one.

Revenue per package was flat compared to the same period last year.  Fuel surcharge rates reduced yield growth by more than 100 basis points.  Growth in base rates offset changes in product and customer mix.

International Package
International operating profit jumped more than 11% to $613 million, setting a record second-quarter level.  Volume growth in all products, disciplined pricing and network efficiency gains contributed to the increase in profitability.

Revenue was up 1.1% compared to the prior year, however currency was a drag of 40 basis points.  Lower fuel surcharges reduced revenue growth by approximately 170 basis points.  Daily Export packages increased 3.9%, as growth out of Europe and Asia offset lower U.S. levels.  The Europe-to-U.S. trade lane increased at a double-digit pace, as customers used the UPS network to benefit from the strength of the U.S. dollar.  Export shipments increased across all product categories and premium products outpaced non-premium.

Revenue per package decreased 1.9%, and on a currency-neutral basis revenue per package was down 1.4%.  Lower fuel surcharge rates reduced revenue per package growth by around 140 basis points.  Base rate improvements were offset by changes in trade lane and customer mix.
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