UPS Revenues Jump 13 Percent in Second Quarter

July 29, 2010
Package delivery giant UPS saw its global revenue increase 13% for the second quarter of 2010 compared to the same quarter a year ago. Revenues for UPS Freight were up 10% over the same period

Package delivery giant UPS saw its global revenue increase 13% for the second quarter of 2010 compared to the same quarter a year ago, in the process generating a 57% increase in operating profit to $1.4 billion. On a reported basis, diluted earnings per share increased 91% over the $0.44 in the second quarter of 2009.

Based on expectations of continued momentum in every segment, UPS has increased its guidance for 2010 adjusted earnings to a range of $3.35 to $3.45 per diluted share, a 45%-to-50% increase over last year.

As the quarter ended, President Obama named UPS chairman and CEO Scott Davis to the President’s Export Council. Davis will lend advice to the administration on policies and programs to improve U.S. exports.

Cash Position
For the six months ending June 30, UPS generated more than $2.5 billion in free cash flow. The company also:
● Paid dividends totaling $910 million.
● Invested $690 million in capital expenditures.
● Repurchased approximately 7 million shares at a cost of $425 million.
● Ended the period with more than $4 billion in cash and marketable securities.

U.S. Domestic Package
Operating profit climbed 57% to $748 million. Revenue increased 7% with margin expansion of 330 basis points. This operating leverage was driven by improved yields and additional efficiencies throughout the UPS integrated network.

Average daily package volume rose more than 1% during the quarter, driven by a 2% growth in ground volume. Revenue per piece improved 6%, primarily through higher fuel surcharges and increases in base pricing. Yields on air products climbed more than 11%.

International Package
The operating profit for the segment increased 78% to $521 million on a 23% jump in revenue. Operating margin improved 580 basis points to 18.8%. Export volume increased 15%, outpacing the market due to strong growth in all regions with Asia leading the way, up more than 40%.

Non-U.S. domestic volume increased 24%, driven by an acquisition in Turkey in the third quarter of last year as well as 13% organic growth, powered by strength in core European countries and Canada.

During the quarter, UPS announced new alliances with its local service partners in Malaysia and Vietnam. These agreements will provide greater access to UPS’s portfolio of services and global network for customers in these emerging markets.

Supply Chain and Freight
Each business unit in the segment improved profitability. Forwarding led the way with tonnage growth exceeding 30%. However, margin expansion was limited due to capacity constraints in the global air freight market.

UPS Freight revenue grew 10% over last year, driven by improved yield and higher weight per shipment. As expected, UPS Freight returned to profitability in the second quarter.

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