EPS of $1.80 increased by 37.4% from previous year
Gross margin of 16.7%
Net income of 1.54B
""Our relentless focus on driving productivity while ensuring excellent customer service allowed us to deliver these results."" - Carol Tomé, CEO
United Parcel Service Inc. (UPS) Q3 2024 Financial Results: Strong Recovery and Strategic Growth Amid Economic Pressures
Executive Summary
In Q3 2024, United Parcel Service Inc. (UPS) exhibited a robust recovery with a revenue increase of 5.6% year-over-year, reaching $22.2 billion. The company also reported an operating profit of $2 billion, up 22.8% compared to the same quarter last year, achieving an operating margin of 8.9%. CEO Carol Tomé highlighted the relentless productivity efforts of UPS employees as key to this success, despite a slightly challenging macroeconomic environment affecting online sales and manufacturing activity. This report synthesizes UPS's financial data with insights from the earnings call, illustrating the strategic adjustments made to optimize revenue quality and enhance market share in the face of competitive pressures.
Management's proactive steps in expanding domestic B2B business and the successful onboarding of new air cargo agreements with the USPS illustrate UPS's commitment to strategic growth. While revenue quality remains central to the company's ongoing success, analysts are encouraged by UPS’s solid cash flow generation and promising guidance for the upcoming quarters.
Key Performance Indicators
Revenue
22.25B
QoQ: 2.18% | YoY:5.62%
Gross Profit
3.71B
16.70% margin
QoQ: -1.69% | YoY:-16.04%
Operating Income
1.99B
QoQ: 2.90% | YoY:18.08%
Net Income
1.54B
QoQ: 9.23% | YoY:36.56%
EPS
1.80
QoQ: 9.09% | YoY:37.40%
Revenue Trend
Margin Analysis
Key Insights
**Total Revenue**: $22.2 billion (up 5.6% YoY)
**Operating Income**: $2 billion (up 22.8% YoY)
**Operating Margin**: 8.9%
**Net Income**: $1.54 billion, translating to an EPS of $1.80 (up 37.4% YoY)
**Free Cash Flow**: $655 million
Financial Highlights
Revenue and Profitability
- Total Revenue: $22.2 billion (up 5.6% YoY)
- Operating Income: $2 billion (up 22.8% YoY)
- Operating Margin: 8.9%
- Net Income: $1.54 billion, translating to an EPS of $1.80 (up 37.4% YoY)
Cash Flow and Balance Sheet
- Free Cash Flow: $655 million
- Cash at End of Period: $5.85 billion
- Total Assets: $68.26 billion
- Total Liabilities: $51.38 billion (Liabilities to Equity Ratio: 3.05)
- Current Ratio: 1.145
Performance Metrics
- Average Daily Volume (ADV): Increased 6.5% YoY
- Revenue per Piece: Declined 2.2% YoY but showed recovery signs with initiatives underway.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
22.25B
5.62%
2.18%
Gross Profit
3.71B
-16.04%
-1.69%
Operating Income
1.99B
18.08%
2.90%
Net Income
1.54B
36.56%
9.23%
EPS
1.80
37.40%
9.09%
Key Financial Ratios
currentRatio
1.15
grossProfitMargin
16.7%
operatingProfitMargin
8.92%
netProfitMargin
6.92%
returnOnAssets
2.25%
returnOnEquity
9.13%
debtEquityRatio
1.56
operatingCashFlowPerShare
$1.76
freeCashFlowPerShare
$0.77
dividendPayoutRatio
87.6%
priceToBookRatio
6.9
priceEarningsRatio
18.89
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Strategic Focus:
- "We faced a macro environment that was slightly worse than we expected...but the macro-environment didn't prevent us from growing revenue and profit." - Carol Tomé, CEO
- "We have heightened our attention to revenue quality with a focus on the segments of the market we want to serve." - Carol Tomé, CEO
Operational Changes:
- "Fit to Serve...is slightly ahead of forecast... We've completed 45 operational closures this year." - Carol Tomé
- "Revenue quality improvement, indicated by base rate increases, is contributing positively to our revenue per piece." - Brian Dykes, CFO
Future Prospects:
- "We expect consolidated revenue of approximately $91.1 billion...lifting our consolidated operating margin target to approximately 9.6%." - Brian Dykes, CFO
"Our relentless focus on driving productivity while ensuring excellent customer service allowed us to deliver these results."
— Carol Tomé, CEO
"This year's holiday season has only 17 shipping days between Black Friday and Christmas Eve. We're prepared to deliver and we'll leverage our network planning tools to operate as efficiently as possible."
— Carol Tomé, CEO
Forward Guidance
Management remains cautiously optimistic about future quarters, projecting revenue of approximately $91.1 billion for the full year 2024, facilitated through proactive pricing strategies and revenue quality enhancement initiatives. Despite a tempered outlook for peak season sales, a targeted operating margin of 9.6% reflects UPS's ability to manage costs effectively while focusing on generating predictable, margin-positive air cargo revenues through the newly onboarded USPS contract. Management advised investors to monitor key factors, including customer demand shifts and the impacts of strategic acquisitions, as performance in early 2025 will greatly depend on these elements.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
UPS Focus
16.70%
8.92%
9.13%
18.89%
GXO
11.90%
2.57%
1.06%
47.12%
JBHT
17.30%
7.30%
3.80%
28.71%
EXPD
12.60%
10.10%
9.74%
20.09%
CHRW
8.05%
3.88%
5.93%
34.01%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
As UPS positions itself for growth through effective cost management and strategic initiatives, the company is expected to maintain revenue stability even amid challenging macroeconomic conditions. The adapting to customer needs in a rapidly changing environment should create new revenue opportunities while enhancing margins, making UPS a potentially attractive long-term investment. Continued focus on automation and network optimization will be crucial to improving profitability metrics in the near future.
Key Investment Factors
Growth Potential
UPS's ongoing investments in enhanced logistics capabilities, like the Frigo-Trans acquisition focusing on temperature-sensitive healthcare logistics, highlight strong growth avenues in a vital market segment.
Profitability Risk
Potential ongoing economic headwinds affecting consumer demand, particularly in e-commerce and industrial sectors, may pressure margins and volume growth if not managed effectively.
Financial Position
UPS maintains a solid financial footing with a current ratio above 1 and manageable debt levels, enabling the company to navigate downturns effectively.
SWOT Analysis
Strengths
Strong brand reputation and extensive logistics network
Healthy cash flow generation and operating margins
Leadership in the integrated freight and logistics sector
Weaknesses
Higher dependency on U.S. domestic market
Challenges in maintaining revenue per piece amid competitive pressures
Opportunities
Expansion into the healthcare logistics market via strategic acquisitions
Leveraging technology for operational efficiencies and improved customer service offerings
Threats
Economic slowdown affecting shipping volumes
Intense competition from other logistics and delivery services