Question

Internal Analysis ( Company UPS)

•             Financial Results: Report and discuss key financial ratios and results. Strengths and weaknesses?

Include your source  

Answer 1

Global freight transportation and logistics services provider UPS, which is based out of Atlanta, has reported an impressive fourth quarter and full year 2018- 19 earnings results.

Quarterly revenue, at USD 20.5 billion, headed upwards 3.6 percent annually, and adjusted earnings per share, at USD 2.11, up 8.8 percent. Full year 2018 revenue rose 3.1 percent annually to USD 74.1billion, which according to UPS was due to strong volume growth in U.S. domestic market and the result of successful execution from all segments in the market.

Individual segment results for Q 4 are as follows

U.S. domestic package revenue increased 6.6 percent to USD 13.4 billion, with operating profit at USD 1.074 billion an increase of 7.5 percent. Average daily shipments were up 8.8 percent to 23.1 million, with Next Day Air up 25.9 percent at 2.252 million, Deferred up 15.6 percent to 2.268 billion, and Ground up 6.3 percent at 18.6 billion. Revenue per package was down 2 percent at USD 9.36, with Next Day Air off 12.6 percent to USD 16.61, Deferred down 5.1 percent at USD 11.99, and Ground down 1 percent at USD 8.16

International Package revenue on an adjusted basis saw a reduction of 1.7 percent at USD 3.729 billion. Domestic international package average revenue per piece was off 1.4 percent at USD 6.49, with export average piece per package revenue down 0.9 percent at USD 28.56

Lastly, Supply Chain and Freight revenue was down 1.3 percent annually at USD 3.398 billion. LTL revenue increased by 9.4 percent to USD 639 million, and LTL revenue per hundredweight rose up 2.5 percent at USD 27.01. Total quarterly shipments increased by 10.3 percent at 2.217 million, and shipments per day at 35,800 were up 10.3 percent.

According to Chairman and CEO David Abney, in the fourth quarter UPS successfully executed its strategies and continued to deliver on its commitments.

Growth in Revenue, improvement in network efficiency to drive operating leverage and continuous transformation to stay one step ahead of market changes along with multi-year investment strategies have positioned UPS well to address the needs of our customers, generate profitable revenue, reward shareholders and create more opportunities for its employees.

In the fourth quarter, which also includes peak season, UPS has successfully delivered more than 1.6 billion packages, including a huge number of residential packages, which were more than company’s expectations. The company was also recognized by third parties for providing on-time service even at high peak volume.

UPS benefitted greatly from increased capacity and automation throughout its network, the use of tested tools and advanced technology along with better collaboration with it's customers to align volume with network capacity. Taking advantage of 20 new aircraft and an additional 10 million square-feet of automated capacity added to the network in 2018 and 2019 has enabled UPS to provide exceptional service to it's customers for the last two peak seasons.

However looking at the current 2020 economic backdrop, it will provide opportunities for UPS, as the consumer demand should remain healthy both globally and in the domestic market. Despite weakness in the industrial sector, UPS is positioning solutions to grow commercial deliveries.

The global GDP estimates are looking at slower growth in the first half of the year, with full-year growth at around 2.5 percent which would end up in the same range as 2019. This will be below to what is generally considered as a normal growth rate.