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United Parcel Service’s (UPS - Free Report) fourth-quarter 2019 earnings (excluding $2.23 from non-recurring items) of $2.11 per share edged past the Zacks Consensus Estimate by a penny. The bottom line also increased 8.8% year over year, primarily due to impressive volume growth in the U.S. Domestic segment.
UPS generated revenues of $20,568 million in the quarter, which fell short of the Zacks Consensus Estimate of $20,578.5 million. However, the top line improved 3.6% on a year-over-year basis. Results were aided by higher average daily volumes. Operating profit increased 13.7% on an adjusted basis in the final quarter of 2019.
Segmental Details
U.S. Domestic Package revenues increased 6.6% year over year to $13,408 million in the fourth quarter, driven by more than 8% volume growth across all products. The greatest increase (up nearly 26%) was in UPS Next Day Air volume. Results were aided by increased automated capacity and introduction of new planes to the fleet. Segmental operating profit improved more than 20% on an adjusted basis to $1,207 million in the quarter. Additionally, unit costs (on an adjusted basis) declined 3.2%, leading to positive operating leverage.
Revenues at the International Package division came in at $3,762 million, down 1.7%. Export volumes declined due to sluggishness in the Asia-U.S. trade lane among other factors. Segmental operating profit came in at $809 million in the reported quarter on an adjusted basis, reflecting an increase of 3.6%. Results were aided by UPS’ cost management initiatives among other factors.
Supply Chain and Freight revenues decreased more than 1% to $3,398 million. Operating profits in the segment increased 17% on an adjusted basis to $262 million in the fourth quarter. Prudent cost management and efforts to increase its customer base for Small- and Medium-sized Businesses (SMB) aided results.
United Parcel Service, Inc. Price, Consensus and EPS Surprise
Cash from operations were $8.6 billion at the end of 2019. UPS, carrying a Zacks Rank #3 (Hold), generated free cash flow of more than $4.1 billion on an adjusted basis in the same period. The company spent $6.5 billion as capital expenditures (adjusted) in 2019. We are also impressed with the company’s efforts to reward shareholders consistently through buybacks and dividend payouts. In 2019, the company paid $3.3 billion as dividends, reflecting an increase of 5.5% on a year-over-year basis. Moreover, the company repurchased more than 9 million shares for roughly $1 billion in 2019. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
2020 Outlook
The package delivery company expects 2020 adjusted earnings per share between $7.76 and $8.06. The Zacks Consensus Estimate for 2019 currently stands at $7.98 per share, above the mid-point ($7.91) of the guided range. Cash from operations is anticipated to be around $10 billion. Adjusted free cash flow is expected to be between $4.3 billion and $4.7 billion. Effective tax rate is expected between 22.5% and 23.5% for 2020. Capital expenditure is expected to be around $6.7 billion for 2020.
Upcoming Releases
Investors interested in the broader Transportation sector await fourth-quarter 2019 earnings reports from key players like Air Lease Corporation (AL - Free Report) , Expeditors International of Washington (EXPD - Free Report) and Hertz Global Holdings (HTZ - Free Report) .
Air Lease and Expeditors will announce results on Feb 14 and Feb 18, respectively. Hertz will release fourth-quarter earnings on Feb 24.
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UPS Q4 Earnings Beat, Revenues Lag, 2020 EPS Guidance Soft
United Parcel Service’s (UPS - Free Report) fourth-quarter 2019 earnings (excluding $2.23 from non-recurring items) of $2.11 per share edged past the Zacks Consensus Estimate by a penny. The bottom line also increased 8.8% year over year, primarily due to impressive volume growth in the U.S. Domestic segment.
UPS generated revenues of $20,568 million in the quarter, which fell short of the Zacks Consensus Estimate of $20,578.5 million. However, the top line improved 3.6% on a year-over-year basis. Results were aided by higher average daily volumes. Operating profit increased 13.7% on an adjusted basis in the final quarter of 2019.
Segmental Details
U.S. Domestic Package revenues increased 6.6% year over year to $13,408 million in the fourth quarter, driven by more than 8% volume growth across all products. The greatest increase (up nearly 26%) was in UPS Next Day Air volume. Results were aided by increased automated capacity and introduction of new planes to the fleet. Segmental operating profit improved more than 20% on an adjusted basis to $1,207 million in the quarter. Additionally, unit costs (on an adjusted basis) declined 3.2%, leading to positive operating leverage.
Revenues at the International Package division came in at $3,762 million, down 1.7%. Export volumes declined due to sluggishness in the Asia-U.S. trade lane among other factors. Segmental operating profit came in at $809 million in the reported quarter on an adjusted basis, reflecting an increase of 3.6%. Results were aided by UPS’ cost management initiatives among other factors.
Supply Chain and Freight revenues decreased more than 1% to $3,398 million. Operating profits in the segment increased 17% on an adjusted basis to $262 million in the fourth quarter. Prudent cost management and efforts to increase its customer base for Small- and Medium-sized Businesses (SMB) aided results.
United Parcel Service, Inc. Price, Consensus and EPS Surprise
United Parcel Service, Inc. price-consensus-eps-surprise-chart | United Parcel Service, Inc. Quote
Other Details
Cash from operations were $8.6 billion at the end of 2019. UPS, carrying a Zacks Rank #3 (Hold), generated free cash flow of more than $4.1 billion on an adjusted basis in the same period. The company spent $6.5 billion as capital expenditures (adjusted) in 2019. We are also impressed with the company’s efforts to reward shareholders consistently through buybacks and dividend payouts. In 2019, the company paid $3.3 billion as dividends, reflecting an increase of 5.5% on a year-over-year basis. Moreover, the company repurchased more than 9 million shares for roughly $1 billion in 2019. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
2020 Outlook
The package delivery company expects 2020 adjusted earnings per share between $7.76 and $8.06. The Zacks Consensus Estimate for 2019 currently stands at $7.98 per share, above the mid-point ($7.91) of the guided range. Cash from operations is anticipated to be around $10 billion. Adjusted free cash flow is expected to be between $4.3 billion and $4.7 billion. Effective tax rate is expected between 22.5% and 23.5% for 2020. Capital expenditure is expected to be around $6.7 billion for 2020.
Upcoming Releases
Investors interested in the broader Transportation sector await fourth-quarter 2019 earnings reports from key players like Air Lease Corporation (AL - Free Report) , Expeditors International of Washington (EXPD - Free Report) and Hertz Global Holdings (HTZ - Free Report) .
Air Lease and Expeditors will announce results on Feb 14 and Feb 18, respectively. Hertz will release fourth-quarter earnings on Feb 24.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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