United Parcel Service, Inc. UPS reported fourth-quarter 2018 earnings (on an adjusted basis) of $1.94 per share, surpassing the Zacks Consensus Estimate of $1.91. Earnings increased almost 17% on a year-over-year basis. It seems that the earnings beat pleased investors. Consequently, shares of the company gained in early trading.
UPS recorded revenues of $19.85 billion, which fell short of the Zacks Consensus Estimate of $19.92 billion. However, revenues increased year over year mainly due to an impressive performance by UPS in the holiday season.
Segmental Details
U.S. Domestic Package revenues climbed 6.3% year over year to $12,575 million in the fourth quarter driven by a 4.8% increase in revenue per piece. Growth was witnessed across all products. Premium Next Day Air revenue increased in excess of 10%, and volume growth was 7.8%.
Strong revenue yields and upbeat on-time performance aided segmental results. The division delivered more than 21 million packages per day (on an average). However, segmental operating profit declined more than 8% to $999 million due to high costs.
International Package revenues improved 2.9% to $3,829 million. Results were aided by strong growth in Europe. Segmental revenue per piece increased 1.7%. The measure increased 4.2% on a currency-neutral basis. Segmental operating profit increased 6.3% to $781 million. On a currency-neutral basis, the metric improved 9.8%. Factors like prudent cost management and impressive revenue yields aided results. Driven by improved operating leverage, operating margin expanded 80 basis points to 20.6% on a currency-neutral basis.
United Parcel Service, Inc. Price, Consensus and EPS Surprise
United Parcel Service, Inc. Price, Consensus and EPS Surprise | United Parcel Service, Inc. Quote
Supply Chain and Freight revenues increased 0.7% to $3,444 million. Operating profits in the segment decreased 7.1% to $224 million in the fourth quarter. The metric declined mainly due to the UPS Freight contract ratification process.
Annual Results
For full-year 2018, the carrier’s earnings (on an adjusted basis) came in at $7.24 per share. Revenues increased 7.9% to nearly $71.9 billion. The Zacks Consensus Estimate was of earnings of $7.22 per share on revenues of $71.94 billion.
Other Details
UPS, which like its rival FedEx Corporation FDX, had left no stone unturned to ensure a successful holiday season, generated free cash flow of $6.13 billion and spent $6.28 billion as capital expenditure in 2018. Moreover, UPS paid approximately $3.2 billion as dividend to shareholders in 2018, up 10%. Additionally, it bought back 8.9 million shares for $1 billion. We are impressed with the company’s efforts to reward shareholders consistently through buybacks and dividend payouts.
Outlook
UPS, carrying a Zacks Rank #4 (Sell), expects 2019 adjusted earnings per share between $7.45 and $7.75, which includes $325 million of pension financing costs. The Zacks Consensus Estimate for 2019 currently stands at $7.76 per share.
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The effective tax rate for 2019 is expected in the range of 23-24%. Capital expenditures are anticipated between 8.5% and 10% of 2019 consolidated revenues. Moreover, the company expects total adjusted operating profit growth in 2019 to be in low-teens with all segments up double-digits.
Upcoming Releases
Investors interested in the broader Transportation sector are keenly awaiting fourth-quarter earnings reports from key players, such as Expeditors International of Washington EXPD and Old Dominion Freight Line, Inc. ODFL. While Old Dominion will release fourth-quarter results on Feb 7, Expeditors will report the same on Feb 19.
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