The United Parcel Service Inc. said on Tuesday (Feb. 2) that profits were roughly triple those seen a year ago and beat Street consensus on the quarter just past. A key driver was faster but extensive use of mail to get through the holiday season, and fundamentals seem strong enough to support sanguine guidance for 2016.
Earnings were better than the Street, with the bottom line coming in at $1.33 billion ($1.48/share), compared to about $453 million ($0.49/share) the year prior.
That positive outlook comes in stark contrast to the dour notes sounded by peers and competitors about the state of the global economy.
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The results, according to The Wall Street Journal, saw eCommerce as a crucial plan of expansion. The latest numbers benefited from the robustness of the holiday season, including continued expansion of eCommerce as a shopping tool for consumers. The consumer model remains resilient; UPS delivered 60 percent of all of December’s transactions, compared with 45 percent in the third quarter.
In terms of cost savings tied to cash flow management, the company said that it has shifted more than 35 percent of SurePost package deliveries into its own network, which made it possible to boost the number of packages being delivered at each stop made by a driver. The payoff can be significant as each 10 percent in additional package “flow” or clustering together can help boost operating income by $200 million. During the analyst call to discuss results, Chief Commercial Officer Alan Gershenhorn said that such tie-ins show that “the things that we are doing to our network now are going to enable us to handle bigger and bigger peaks.”
Guidance from UPS posits that earnings should be in the range of $5.70 to $5.90, which would indicate growth of between 5 percent and 9 percent and would bracket the $5.73 that analysts expect.