UPS blows out Q2 results

The nation's largest transportation company is on a roll.

UPS Inc. today announced a 71-percent increase in second-quarter per-share earnings, paced by gains across the company's domestic and international package operations as well as its supply chain and freight division.

Second-quarter revenue for the Atlanta-based company rose 13 percent year over year to $12.2 billion, resulting in a 57-percent increase in operating profit to $1.4 billion. Operating margins year over year rose by well over 30 percent.

UPS moved 948 million packages across its global network in the quarter, a 4-percent increase over year-earlier levels. Revenue per piece rose 7 percent, driven by higher base rates, heavier average shipment weight, and the effect of increased fuel surcharges.

Expecting continued strength through the rest of 2010, UPS said it increased its full-year 2010 earnings forecast to between $3.35 and $3.45 per share. Prior to the release of the second-quarter results, UPS had set its full-year forecast at $3.05 to $3.10 a share.

The strong second-quarter performance was a sequential improvement over the first quarter, when earnings per share rose 37 percent and total revenue climbed 7 percent.

"UPS fired on all cylinders in the second quarter even in the face of a mixed global economic environment," Scott Davis, UPS's chairman and CEO, said in a statement announcing the results.

The company's domestic package operations, which account for more than half of its business, generated $7.27 billion in revenue in the quarter, up from $6.8 billion in the prior-year quarter. Operating profits climbed 57 percent to $748 million.

UPS spokesman Norman Black said the U.S. results had little to do with the broad-based economic growth and were more the result of the company's strong execution and the lingering impact of DHL Express's January 2009 exit from the United States, which has left more traffic for UPS and its chief rival FedEx Corp.

"We've been predicting a slow, sluggish recovery [in the United States] and that's what we're seeing," Black said.

The international package segment, long the company's most profitable category, reported a 58-percent jump in operating profits to $521 million on a 23-percent increase in year-over-year revenue to $2.77 billion. Export volumes from all of the countries served by UPS rose 15 percent, with Asian exports up 40 percent year over year, UPS said.

Black said that internationally, UPS has benefited from growing volumes out of its Chinese hubs in Shenzhen and Shanghai, "unexpectedly strong growth" on Asia-to-Europe and Asia-U.S. trade lanes, and continued double-digit gains in Europe despite concerns over the sovereign debt crisis and a possible economic slowdown on the continent.

The company's supply chain and freight division, which includes UPS's supply chain solutions and less-than-truckload (LTL) businesses, showed increases in revenue and operating profits, with revenue at $2.16 billion and operating profit at $133 million. Operating margins were compressed, however, because the unit's freight forwarding business had to pay more to secure air freight lift in the face of surging global demand for aircraft capacity.

UPS Freight, the company's LTL unit, grew revenue by 10 percent year over year and was profitable in the second quarter.