UPS (UPS 109.79, -4.45, -3.90%) held a pre-market loss of 4.3% as
lower operating profit overshadowed in-line earnings and increased free cash
The logistics company reported in-line third quarter earnings of $1.82 per share on a 7.9% year/year increase in revenue to $17.44 bln, which was a touch below market expectations.
Going forward, UPS reaffirmed expectations for fiscal year earnings between $7.03/share and $7.37/share. Free cash flow is now expected to exceed $5.0 bln, up from previous guidance for free cash flow of up to $5.0 bln.
Average revenue yield increased 4.0% with all product categories showing base-pricing gains. Total operating profit fell 4.7% to $1.73 bln.
Looking at the segment breakdown, U.S. Domestic revenue grew 8.1% year/year to $10.4 bln. The segment saw revenue, volume, and revenue per piece growth across all products while daily shipments increased 3.3% with Next Day Air and Ground products leading the increase. Adjusted operating profit declined 2.3% to $988 mln due to planned increases in pension expense and network improvement costs.
International segment revenue grew 3.0% to $3.48 bln. Unfavorable currency translations reduced the revenue growth rate by two percentage points. Segment yield grew 3.0% while currency-neutral yield increased 5.1%. Improved product mix and revenue management actions were responsible for the growth. Adjusted operating profit fell 5.0% to $576 mln due to headwinds from currency and fuel and from economic softening related to changing trade policies.
Supply Chain and Freight revenue grew 12.2% to $3.53 bln. Revenue in the forwarding business jumped 17% while UPS Freight revenue grew 11% on higher pricing and heavier shipments. Adjusted operating profit rose 33.3% to $260 mln.
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