United Parcel Service Inc on Tuesday reported a significantly higher quarterly net profit on a strong performance during the crucial holiday season and gave a solid 2016 earnings outlook despite warning of uncertain economic conditions. The company's shares rose 1.6 percent in early trading to $95.60. Often seen as a bellwether of US economic activity, UPS showed improved margins in all three of its business units.
The Atlanta-based company was under pressure to deliver in the fourth quarter after two disappointing peak seasons in a row. In 2013, UPS was caught by a late surge in e-commerce packages, leaving many stranded on Christmas Eve. In 2014, the company overspent for a package surge that did not materialise. In the run-up to Christmas 2015, UPS worked to manage package flows, but to control its costs it also made clear to retail customers that if they missed key deadlines ahead of the holiday for ground deliveries, they would be charged more for moving those packages by air.
UPS posted fourth-quarter net income of $1.33 billion or $1.48 per share, nearly triple the $453 million or 49 cents per share it reported a year earlier. Analysts had on average expected earnings per share for the quarter of $1.42. Revenue in the quarter rose 1 percent to $16.1 billion from $15.9 billion a year earlier. Analysts had expected revenue of nearly $16.3 billion.
Excluding a $79 million non-cash, after-tax, mark-to-market pension charge, UPS reported earnings per share for the quarter of $1.57. Revenue at the company's core US domestic package service rose 2.6 percent to $10.3 billion. Average daily shipments rose 2.4 percent on strong demand in the quarter from online retailers. Packages sent by air saw double-digit growth. The company's international package unit was more profitable in the quarter, thanks largely to a strong performance in Europe. "Disciplined pricing, favourable customer and product mix, combined with improved operational performance" to boost profitability, the company said.