UPS Profit Tops Estimates on E-Commerce Demand, Higher Prices

(Bloomberg) — United Parcel Service Inc. increased package deliveries and prices amid a surge of e-commerce demand to post profit that topped analysts’ expectations.

Adjusted earnings hit $2.71 a share, up from $2.28 a year earlier, the Atlanta-based courier said Tuesday in a statement. Analysts had predicted $2.54. Revenue rose 9.2% to $23.2 billion, while analysts had expected $22.6 billion.

UPS raised its outlook for an operating margin of 13% for 2021 from a target of 12.7% set in July. The company also increased capital spending plans for the year to $4.2 billion from $4 billion in July.

UPS and rival FedEx Corp. have been grappling with hefty volume since the pandemic hit last year. Both have aggressively raised prices to offset the expense of handling more residential deliveries, which have grown faster than more-profitable commercial packages. UPS is shielded more from the labor shortage than its key competitor because, unlike FedEx, it has a union workforce and pays the highest wages in the industry.

The courier is seeking to hire 100,000 seasonal workers to help with the holiday delivery rush that begins at the end of November and lasts into January. 

UPS shares rose 2% in early trading in New York. 

The company has focused on raising profit margins under Carol Tome, who took over as chief executive officer last year. Tome laid out a strategy of “better, not bigger” to rein in UPS’s past tendency to gobble up all the volume it could no matter how well it paid. She also sold the lower-margin freight business in April for $800 million and announced in September an agreement to purchase Roadie, a same-day delivery startup.

Adjusted operating margins rose to about 12.8% from 11.3% a year earlier as price hikes and UPS’s focus on higher-value packages made up for rising costs to hire workers and to protect them from Covid-19. Analysts had estimated margins of 12.2%.

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