uploads///UPS International

Strong European Operations Bump UPS’s 2Q16 International Revenue

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Aug. 3 2016, Updated 10:07 a.m. ET

UPS’s international revenues in 2Q16

Previously, we discussed United Parcel Service’s (UPS) US Domestic Package segment. Here, we’ll look into the International Package segment. This segment includes the Domestic, Export, and Cargo subsegments.

For 2Q16, UPS’s International Package segment’s revenue rose by 1.1% to $3.1 billion, compared to $3.0 billion in 2Q15.

The rise in the segment’s 2Q16 revenue was mainly due to strong European operations’ contributing to overall gains in revenue growth. Better volumes from other international geographies also led to a rise in the company’s international revenue in 2Q16.

According to UPS, its Europe-to-US lanes expanded at a double-digit rate in the quarter.

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Revenue per package falls

In line with its domestic segment, UPS implemented base rate increases across all the geographical areas globally. This was offset by lower fuel surcharges, which had a 1.7% impact on UPS’s revenue-per-package growth.

In 2Q16, UPS’s revenue per package fell by 1.9% to $16.7 on a year-over-year (or YoY) basis. Much of the fall was shared by the Export division in UPS’s International Package segment. However, currency-neutral revenue per piece for the entire International segment rose by 1.5% in 2Q16.

Volumes

UPS’s International Package volumes rose by 4.3% YoY, from 2.6 million average daily packages in 2Q15 to 2.8 million daily packages in 2Q16. The company witnessed better non-US domestic daily shipment growth in 2Q16 due to certain revenue management actions it took in 2015.

Outlook

UPS expects its international revenue to rise by 2%–4% in 2016. Revenue in 2H16 is expected to be dragged down due to currency fluctuations and lower fuel surcharges.

UPS’s long-term outlook until 2019 includes targeted revenue growth of 6%–9% for its International segment. It also aims for a targeted operating profit of 9%–12% during the same period.

UPS makes up 3.8% of the holdings of the Industrial Select Sector SPDR ETF (XLI). This ETF also invests 2.2% in rival FedEx (FDX). Other major logistics companies included in XLI are CSX (CSX), Union Pacific (UNP), and C.H. Robinson Worldwide (CHRW).

In the next part, we’ll examine UPS’s Supply Chain and Freight segment. We’ll also take note of its management’s insight about the integration of Coyote Logistics.

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