UPS reports Q2 growth on strong Next Day Air demand, announces new services and drone application 

B747-8 freighter courtesy of UPS Airlines

Today, UPS reported second-quarter 2019 net income was up slightly by 1.0% year-over-year to $1.70 billion, on revenues that were up by 3.4% at $18.1 billion. Operating profit for the quarter grew 6.3% to $1.23 billion, as the company leveraged rising demand for U.S. Next Day Air service and cost management strategies in its International Packagand Supply Chain and Freight segments. 

The company also announced its launch of new products and services, including UPS My Choice for business, UPS Worldwide Economy and expanded UPS Access Points. The UPS My Choice and UPS Worldwide Economy are designed to give small and medium-sized businesses visibility and control throughout the shipment process via digital delivery notifications. The service is available in the U.S., though the integrator also intends to rollout the service internationally.  

Beyond its new services, the integrator further announced that it formed a subsidiary, UPS Flight Forward, and applied to the U.S. Federal Aviation Administration (FAA) for certification to operate a drone delivery unit. If approved, UPS Flight Forward will develop and operate unmanned aerial systems as part of its network. The unit will be one of the first fully certified U.S. drone operations, according to the company. UPS currently operates drone healthcare deliveries in specific use cases under FAA rules, but intends to expand its drone delivery service with this new unit. 

Looking now at the results by operating segment: 

US Domestic Package: UPS reported volumes up 30.3% for its high-yield Next Day Air product. This was complemented by 12.6% growth in Deferred volume, and 4.1% growth in Ground volume. The volume growth, combined with per-piece revenue rising an average of 7.1%, pushed segment revenue for the quarter to $10.12 million – up 0.5% over 2Q18. 

International Package: Average daily volumes were down 2.1% to 3.01 million as revenue-per-piece dropped 0.4%. Package volume decreased 2.6% for the International Domestic product, though per-package revenue increased 0.3%. Export volumes declined by 2.6%, matched with a slight 0.5% drop in per-piece revenue. 

Supply Chain and Freight: Revenue was mixed across the Supply Chain and Freight segment. Forwarding revenue dropped 9.8% to just under $1.5 billion. Despite the lower revenues, Peretz said profits for the unit remained strong because of better spreads between freight procurement and sales. Segment operating profit increased 10.5% to $273 million. 

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