United Parcel Service, Inc. UPS reported third-quarter 2018 earnings (excluding 9 cents from non-recurring items) of $1.82 per share, in line with the Zacks Consensus Estimate. Earnings increased substantially on a year-over-year basis.

Revenues improved significantly year over year to $17,444 million and outpaced the Zacks Consensus Estimate of $17,411.5 million. Results were aided by strong e-commerce growth.

Segmental Results

U.S. Domestic Package revenues climbed 8.1% year over year to $10,437 million during the third quarter owing to increased demand for the company’s solutions as well as a robust yield expansion. On the contrary, segmental operating profit (adjusted) declined 2.3% to $988 million.

Segmental average daily package volumes expanded 3.3%, backed by a 3.7% and 3.4% rise in Next Day Air and Ground products, respectively. The metric inched up 1.3% at the Deferred Air products sub-group.

International Package revenues improved 3% to $3,478 million. Daily export volumes rose 2.6% in the quarter under review on the back of 4.2% growth in Europe export volume. Segmental operating profit (adjusted) decreased approximately 5% to $576 million.

Supply Chain and Freight revenues grew more than 12% to $3,529 million. Operating profits (adjusted) in the segment surged 33.3% to $260 million in the third quarter. Segmental results were boosted by impressive growth strategies leading to higher yield.

United Parcel Service, Inc. Price, Consensus and EPS Surprise

 

United Parcel Service, Inc. Price, Consensus and EPS Surprise | United Parcel Service, Inc. Quote

Other Details

This Zacks Rank #3 (Hold) company’s capital expenditure was $4.5 billion in the first nine months of the year. Free cash flow increased to $4.9 billion in the same period. UPS is also focusing on rewarding its shareholders through dividends and buybacks. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Outlook

The package delivery company expects 2018 adjusted earnings per share between $7.03 and $7.37, unchanged from its previous expectation. The Zacks Consensus Estimate for 2018 earnings per share stands at $7.25. Free cash flow is likely to be more than $5 billion in the current year (previous expectation was $5 billion). Capital expenditure is anticipated between $6.5 billion and $7 billion in 2018, unaltered from the past guidance.

Meanwhile, the company continues to estimate fourth-quarter adjusted earnings per share to rise approximately 15% year over year despite currency-related headwinds and a shortfall of one operating day during the peak season. Also, an effective tax rate is projected between 23% and 24% in the quarter.

Upcoming Releases

Investors interested in the broader Zacks Transportation sector are keenly awaiting third-quarter earnings reports from key players such as Southwest Airlines Co. LUV, Old Dominion Freight Line, Inc. ODFL and Union Pacific Corporation UNP. Each company will report respective earnings numbers on Oct 25.

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