Overall revenue was up over 4% to $13bn and operating profit up almost 7% to $1.6bn. US Domestic Package division noted revenue up 6.1% thanks to the growing e-commerce trend – with the Deferred product up almost 9%; Ground product up 6.3% and Next Day Air up 4.1% - all increases attributed to the growth of e-commerce and increase in lightweight products.Average daily package increases were up 4.5% overall with Deferred up almost 10%; Next Day Air up 5% and Ground up 4%. Half of the growth in Ground resulted from a 30% increase in lightweight products.
This increase in revenue and domestic volumes affected average revenue per piece for both Next Day Air with a decline of 0.8% and Deferred with a decline of 0.9% however; Ground noted an increase of 2.2%.
International Package division recorded a 2.3% increase in revenue - $2.9bn. Domestic and Export noted increases of 1.7% and 3% respectively however Cargo declined 6.4%. Volume-wise, Domestic was up 1.1% and Export up 5.4%. Exports increased at a mid-single digit pace for both Europe and the Americas. However, the higher-yielding lanes out of Asia were flat. Also, UPS noted European shippers were increasingly relying on standard products. Another trend UPS noted was that of shifting trade patterns. Although further details were not provided, this is not surprising as the global economies two biggest importers – the US and the EU – continue to struggle with sluggish economies and in the EU’s case a recession.The Supply Chain and Freight division reported a 1.3% increase in revenue to $2.2bn. Not surprising, Forwarding and Logistics group reported a slight decline in revenue. Revenues declined for the Forwarding group. According to the company, this was due to lower tonnage and excess capacity in the market; however, other factors could be attributing to this decline as well. The Distribution group continues to expand its healthcare offerings by adding 5 new facilities this year which will bring the total to 38 dedicated healthcare compliant facilities by the end of this year.
Although UPS Freight broke even during the quarter, tonnage declined. According to the company, UPS Freight faced difficult comparisons from first quarter 2011. Still, this must be of concern as many of the trucking companies that have recently reported earnings so far have noted some increase in tonnage.Overall, first quarter could have been much worse. UPS will need to work on yields as it adjusts to a growing shift toward B2C. As Europe falls into a recession and export growth from Asia declines, UPS will rely more on the US domestic market for revenue growth particularly as the US economy continues to show signs of improvement. Expect more new product/service announcements such as its recently announced cross-border service as UPS takes advantage of growth opportunities within the Americas region – particularly that of the increasing manufacturing activity within Mexico and along its border with the US.
Looking forward, for the second and third quarters, the company expects revenue and tonnage to be similar to first quarter whereas stronger growth overall is expected for fourth quarter.