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UPS third quarter profit up 14pc to US$576 million as revenue rises 4.9pc

ATLANTA's United Parcel Service (UPS) third quarter operating profit increased 14 per cent year on year to US$576 million, drawn on revenues of $14.9 billion, an increase of 4.9 per cent.

Revenues in supply chain and freight division increased 8.1 per cent to $2.6 billion, mainly due to the company's acquisition of Chicago-based Coyote Logistics.

UPS experienced tonnage and revenue growth across key sectors of its supply chain business in the third quarter despite strong trading headwinds, particularly from weak air freight and US truckload markets.

"Market conditions in international air freight and the US truckload brokerage industries remain soft," said a company statement. "Despite these conditions, we saw increased loads in Coyote Logistics."

UPS said its forwarding business experienced tonnage growth in the ocean and North American air freight sectors, and this partially offset the decline in international air freight tonnage.

"The distribution unit experienced mid-single digit revenue growth this quarter," said UPS. "Revenue gains in the healthcare, retail and aerospace sectors led the unit higher."

UPS third quarter freight less than truck load revenue increased 3.7 per cent year on year, but the company said total tonnage remained "challenged by current market conditions" and the business unit continued to focus on "disciplined revenue management and profitable trade lanes".

Stifel Financial said the performance of UPS' Supply Chain & Freight division was weak and attributable to it being more exposed than the integrator's international and US package businesses to the broader economy, and less exposed to fast-growing e-commerce markets, reports Lloyd's Loading List.

"UPS Freight felt the pain of another soft quarter in LTL volumes, and Freight Forwarding was hurt most by weakness in international air freight," said a note from the analyst. "Overall revenue beat our estimates but margins fell a little short."

The analyst said the purchase was driven by three factors: the continued growth in international e-commerce; UPS' desire to add more capacity to its US line-haul network by taking some air packages off the road, and because new jets will help add extra capacity at peak season, a market in which "Amazon and FedEx have recently secured much of the temporary airlift for themselves".