UPS Stocks Surge After Record Quarterly Earnings Report

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 UPS Stocks Surge After Record Quarterly Earnings Report
Image source: Tridsanu Thopet,Shutterstock

Summary

  • UPS stocks (NYSE:UPS) soared over 11% after it announced a robust first-quarter earnings report.
  • Its operating profits jumped a whopping 158% to US$2.8 billion in Q1, compared to the same period of 2020.
  • UPS stocks gained more than 19% in year-to-date and over 21% in the past six months.

The stocks of United Parcel Service Inc (NYSE:UPS) jumped more than 11% on Tuesday, April 27, after the company announced a robust first-quarter earnings report of 2021. The stock was trading at US$195.49 at 2:42 pm ET on Tuesday, which was an increase of 11.19% from the previous close.

The company’s consolidated revenue rose 27% to US$22.9 billion, compared to the corresponding period of 2020. Also, its operating profits jumped a whopping 158% to US$2.8 billion, compared to the same quarter a year ago. Furthermore, diluted earnings per share increased by 393% to US$5.47.

According to UPS CEO Carol Tome, the company’s strategy to focus on better services, including timely delivery of covid vaccines, has paid off, resulting in spectacular growth in the first quarter. UPS stocks gained more than 19% in value year-to-date and over 21% in the past six months.

The company further said that its operating profit in the domestic market rose over 273% while its International operating income surged almost 97%. Moreover, the American Rescue Plan Act (ARPA), signed into law by the US Congress in the first quarter, helped boost the company’s cash flow.

ARPA had eliminated the need to make pension contributions in the short term, thereby freeing up cash for use in growth areas. UPS said that ARPA had cut its pension liability by over US$6 billion. Meanwhile, it said that it has put off talks on dividends until a meeting of its investors in June.

Pic Credit: Pixabay.

Pandemic-Fuelled Demand Drives Growth

UPS’s first-quarter growth was fuelled by strong demand for doorstep deliveries, including air shipping, during the pandemic. Its results have beat the conservative estimates of the market. While many businesses had suffered due to the pandemic, e-commerce has seen unparalleled growth during the period as online trade boomed. The biggest boost for UPS, however, was the demand for medicine deliveries, especially covid drugs, which has hugely contributed to its first-quarter growth.

However, given the continued uncertainty in the markets due to the pandemic, the company has not provided any revenue or earnings guidance for the year. The company, though, has reiterated to implement its yearly capital allocation plans. The UPS said that it will further reveal its plans for the year during its investors’ meet on June 9, 2021.

Meanwhile, the company has said it would close the sale of UPS Freight by the second quarter of 2021. While its capital expenditure would be around US$4 billion in 2021, its long-term debt repayments to total around US$2.5 billion. Also, the company said it has no plans to repurchase its stocks.

UPS, which operates in more than 220 countries, had reported total revenues of US$84.6 billion in 2020, helped by its strong logistics business across geographies. It is also one of the major employers, with some 540,000 staff members under its payroll.

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