UPS profit rises as e-commerce shipping speeds up

Employees sort packages at the United Parcel Service (UPS) Chicago Area Consolidation Hub in Hodgkins, Illinois.

Daniel Acker | Bloomberg | Getty Images

United Parcel Service on Wednesday said demand for its Next Day Air and Ground services drove better-than-expected quarterly profit as large retailers rushed packages to online shoppers.

Shares in UPS jumped 8 percent to $113.64 in early trading.

UPS, the world’s biggest package delivery company, has been spending billions of dollars to make its network faster and more efficient. Those investments — which include more automated package sorting facilities and new cargo planes — are driving down the cost of delivering small numbers of e-commerce packages to far-flung home addresses.

“We’ve got momentum here and we believe we can continue,” said Chief Executive David Abney, who added that the company is at an “important turning point” in its nearly 112-year history.

Next Day Air volume surged an unexpected 30% in UPS’ key domestic business during the second-quarter, as Amazon.com and other large retailers adopted one-day shipping.

“The incremental volume came largely from Amazon, in our view,” Stifel analyst David Ross said in a client note.

Abney said some competitors lost second-day air business to its Next Day Air service.

“FedEx would be the only other rival that offers such a service,” said Cathy Morrow Roberson, founder of consulting firm Logistics Trends & Insights.

FedEx in June declined to renew its U.S. Express air shipping contract with Amazon, which is building out a logistics network to rival those of established delivery companies like UPS, FedEx, and Deutsche Post DHL Group.

UPS reported second-quarter net income of $1.69 billion, or $1.94 per share, compared with $1.49 billion, or $1.71 per share, a year earlier.

Analysts had expected a profit of $1.92 per share, according to IBES data from Refinitiv.

Revenue rose 3.4% to $18.05 billion.

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