UPS 1st quarter results slightly lower than previous year

UPS 767-34AF(ER) (37947/1024) N349UP smokes the mains on Rwy 30 at Long Beach Airport (LGB/KLGB) on July 9, 2013.

(Photo by Michael Carter)

United Parcel Service (UPS) reported first-quarter net income of $911 million, down 12.2% from a net profit of $1.04 billion in the prior-year quarter, as earnings were hit hard by severe winter weather in the US.

In the US domestic market, which accounts for the majority of UPS’s business, “the company experienced lost revenue and additional cost as a result of significant network disruptions on more than half of the operating days during the quarter,” UPS stated. “Overtime wages, purchased transportation and snow removal costs increased substantially over the prior year.”

UPS’s first-quarter domestic package operating profit dropped 14.6% year-over-year to $927 million and the company’s overall operating profit declined 4.2% to $1.51 billion. “Unusually harsh weather weighed on operating profit by approximately $200 million, due to increased expenses and slower revenue growth,” UPS said.

CFO Kurt Kuehn added, “During the quarter, the momentum of the underlying business was masked by the disruption of inclement weather.”

UPS chairman and CEO Scott Davis noted UPS was not alone: “Much of the US economy was negatively affected by the severe weather conditions in the first quarter.” He told analysts and reporters that this further hurt the company’s business, saying, “We saw business-to-business shipments slow as manufacturers, distributors and retailers closed shop on many days owing to weather conditions … The good news is spring has arrived.”

UPS experienced strength in its air-intensive international package business, which posted a 24.4% year-year-over first-quarter operating profit gain to $438 million on a 5% rise in revenue to $3.13 billion. “Our international export volume was 7.7% higher, with Europe leading the way,” Kuehn said.

Overall company revenue rose 2.6% year-over-year in the first quarter to $13.78 billion.
Kuehn said UPS is “encouraged by the positive trends in our business” and expects an improved performance in the final three quarters of 2014 with the challenges posed by winter weather behind it.

Looking at the full-year outlook, Davis said, “The macro-economic environment looks decent as we move forward. Both the global GDP and US GDP will be a little better than they were last year. Not robust, but better than they were a year ago.”

(Aaron Karp - ATWOnline News)