The tone of the UPS 4Q18 earnings call was uniformly upbeat as strong metrics were revealed one after another. Volume, revenues, earnings per share, and operating margins all went up in the fourth quarter.
Comments around peak season performance were far more cheerful than last year as well. Industry-leading performance was achieved with volumes flowing through a network of 323 buildings, including 5 new super-hubs among the 22 new or retro-fitted facilities added.
COO James Barber stated: “Several factors led to our service and performance success. We coordinated closely with customers for improved forecasting, expanded air and ground capacity with higher levels of automation, refined staffing and training plans, introduced new technology to align incoming volume with available capacity and, finally, we implemented pricing actions to better control shipment characteristics.”
Barber continued to describe that revenue per piece increased nearly 5% domestically, which is “the best RPP gain we’ve generated in many years” and also stated that “B2B deliveries grew by about 3%, reflecting our customers’ favorable reactions to our marketing and pricing strategies.”
Revenue quality was mentioned multiple times throughout the call, citing strategic pricing that resulted in more favorable customer and product mix. Chief Sales and Solutions Officer Kathleen Gutmann mentioned “going further with small and medium-size businesses, and being more selective with large customers”.
Leadership anticipates the momentum to continue into 2019. “We anticipate growth in the air shipments to be in the mid to high single digits and ground in the low single digit range. Operating profit is projected to grow between 10% and 13%, coupled with margin expansion” said CFO Richard Peretz.
The executive team was unified in describing 2019 as a “pivot point” where the fruits of transformation efforts that started in 2017 will continue to bear fruit. UPS set expectations of operating profits to grow in the low teens with all segments up double-digits. US Domestic revenue is expected to increase 4% to 6%.
“We do see 2019 as a pivot point. If you go through the numbers, you’ll see that operating profit is growing, which means that we are creating leverage and it really is the start of something that we talked about would happen as we had our investments come in line, transformation as well as improving operations throughout the country.”
HIGHLIGHTS AT A GLANCE:
- 4Q18 EPS of $0.52; Adjusted 4Q EPS up nearly 17% to $1.94
- Pricing and Mix Strategies Lift 4Q Revenue Quality
- U.S. Domestic Revenue up 6.3% on 4Q Yield Growth
- International 4Q Achieves Record Profits; Margin Rises above 20%
- Supply Chain & Freight Revenue Rises, driven by Forwarding and Logistics
- 2018 Full-year Cash from Operations was $12.7B
- Free Cash Flow in 2018 topped $6B, Exceeding Expectations
- 2019 Total Adjusted Operating Profit Growth* in the Low-teens with all Segments up Double-digits
- Announces Full-Year 2019 Adjusted EPS Guidance* Range of $7.45 to $7.75
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