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Why UPS’s International Package Revenues Rose in Q2 2018

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International Package revenues

In the previous part, we assessed United Parcel Service’s (UPS) US Domestic Package segment. Here, we’ll review the parcel delivery giant’s International Package segment’s performance in the second quarter.

In the second quarter, UPS’s International Package segment’s revenues jumped 13.6% to $3.6 billion from $3.1 billion in the second quarter last year. This vertical’s services include Domestic Package, Export Package, and Cargo and Other.

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Segment’s yield and volume statistics

The company’s Export-Package service is the largest contributor to United Parcel Service’s International Package segment. In the second quarter, this service accounted for 76.3% of the International Package segment’s revenues, marginally down from 76.5% in the second quarter of 2017.

Its Export-Package’s revenues grew 13.2% to $2.7 billion in the quarter from $2.4 billion in the second quarter of 2017. Export’s average daily package volume jumped 9.5% to 1.4 million from 1.3 million YoY (year-over-year). Its yield expressed in average revenue per piece rose 3.4% YoY during the quarter.

Domestic Package’s revenues increased 12.4% to $700.0 million in the second quarter from $623.0 million in the second quarter of 2017. Its revenue growth was fueled by a 2.0% rise in average daily package volume and 10.0% growth in average revenue per piece. The revenues for Cargo and Other rose 27.0% to $155.0 million from $122.0 million YoY.

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Management insights

United Parcel Service expects to see higher volume gains in the US-to-Europe trade lanes in 2018. The company also expects the interregional growth in Asia and Europe to continue in the second half of this year. Investment in speed, automation, and capacity should drive UPS’s International Package segment’s growth. UPS forecasts global real GDP to grow 3.0% or a bit higher in 2018.

The global courier service giant maintains a positive outlook for the US industrial economy amid volatility in the US dollar. UPS believes the European Central bank stimulus should subdue Brexit worries in Europe. The company is also bullish on Asia with a specific emphasis on China in the wake of US-China trade tensions.

A look at XLI

United Parcel Service class B stock comprises 3.52% of the Industrial Select Sector SPDR Fund ETF (XLI). Investors seeking exposure to industrial stocks can consider investing in XLI. Among the major transportation and logistics companies, XLI has 5.0% weight in Union Pacific (UNP), 2.68% weight in CSX (CSX), and 2.57% weight in FedEx (FDX).

In the next part, we’ll consider UPS’s Supply Chain and Freight segment’s second-quarter results.

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