Record peak season boosts UPS' 2017 results

LOUISVILLE, Ky. (WDRB) --  UPS handled 762 million packages during its Thanksgiving-Christmas peak season, a 7 percent increase from last year’s holiday rush and 12 million more packages than the shipping giant had forecast, executives said on the company’s quarterly earnings call.

The record year-end volume helped boost UPS’ revenue by 8 percent in 2017, to $65 billion.

At the same time, executives said they had trouble managing an unexpected 20 percent surge in online orders from e-commerce customers like during the “Cyber week” following Thanksgiving, leading to “additional operating costs” of $125 million.

“That old saying, rising tides lift all boats -- that’s the thing we were facing,” CEO David Abney told stock analysts on the company’s earnings call. “This was not just the large customers; this was throughout the network.”

Atlanta-based UPS maintains its Worldport global air hub at Louisville International Airport, and the hub plays a critical role in package deliveries during the peak season.

Abney and other executives talked up the economic benefits of the Tax Cuts & Job Act passed by the GOP-led Congress  in December, saying it is the “catalyst” for $12 billion in planned investments, including $5 billion to shore up the company’s pension plans for employees.

The law, among other changes, reduces corporate income taxes. For UPS, it will mean a tax rate of 23 to 24 percent, compared to the current 35 percent, executives said.

On the call, executives said the reduced tax bill should add 80 to 85 cents per share to earnings. That would equate to about $700 million per year in additional earnings, based on UPS's current shares outstanding, according to WDRB's estimate.

“We really believe it’s going to stimulate the economy, create jobs, and those jobs are going to create more shipments,” Abney said. “…It certainly makes American companies more competitive.”

UPS said it's increasing capital investments and making them earlier than previously planned.

The company has ordered another 14 Boeing 747-8 cargo jets. The company added three of the mega-sized planes, which can carry 30,000 packages at a time, to its fleet in 2017, with another 11 on order. Thursday’s announcement brings the total to 28. UPS is also adding four 767 aircraft.

All of the new jets will be delivered by 2022.

“The new freighters will allow us to continue upsizing aircraft on routes and will create a cascading effect that will boost capacity on regional routes around the world,” Brendan Canavan, president of Louisville-based UPS Airlines, said in a press release.

Executives also said they plan to increase dividends paid to shareholders in 2018 and to repurchases another $1 billion of the company's stock. UPS bought back $1.8 billion worth of shares in 2017.

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