UPS 1Q15 Earnings Call Notes

14% EPS increase

” am pleased to report UPS produced solid performance across all the segments. Earnings per share increased more than 14% led by International. This segment continues to demonstrate positive momentum as our unmatched integrated network generates high returns and significant value for customers around the world.

North America performed as planned, volume moderated a bit by choice

“The US Domestic segment performed as planned. Our actions on revenue management and pricing drove revenue per piece higher during the first quarter. The pace of volume moderated as we chose to forego some lower yielding opportunities. And in the Supply Chain and Freight segment, revenue and operating profit improved over last year as all three business units made progress.”

Full year guidance 5.05-5.30 unchanged

“In summary, our full year earnings per share guidance is unchanged as $5.05 to $5.30, up 6% to 12% over last year.”

CFO change

“As you know, UPS issued a second press release announcing the retirement of Kurt Kuehn and the appointment of Richard Peretz as CFO. Kurt has served UPS for nearly 38 years and has been the CFO for the last eight. I have come to relying on his leadership and support over many years.”

Dimensional pricing overcoming fuel surcharge headwinds

“Pricing has been a real positive story. We are certainly proud of our sales and marketing team discipline and the value selling. As you can see, we were 200 basis points better than last year’s year-over-year growth rate with even a much larger fuel drag. So the impact came at the high-end of our expectation range and certainly the dim weight along with other revenue management practices contributed to that.”

West coast port gave us some lift, but that’s mitigating now

“The West Coast Port stoppage in the first quarter gave us some lift, that’s mitigating as we speak. But we have to balance that network obviously with the small package network. Chinese New Year, we had a really good new year this year. We had some great alignment of the network to the volume.”

B2B growth stronger than B2C for the first time in a very long time

“or the first time in a very, very long time, our B2B growth was actually a bit stronger than our B2C and as you know, our deferred volumes were also strong and the SurePost while it’s still strong, certainly, year-over-year slowing down as that product becomes more mature. Just keep in mind that this is just a one quarter data and we are still expecting about 3% growth for the year.”

e-comerce starting to generate significant B2BGDP growth not as strong as forecast, but German exports forecast to grow a lot

“from a macro point of view and then I’ll turn it over to Jim. But the – International growth is not expected to be quite as strong as previous estimates. It’s not 2.8% GDP growth versus 3.0%. So the outlook is really mixed at the regional level. In Europe, the growth is estimated to be 1.9%.

So, previously forecasted at 1.7% and that’s really driven by Germany, and one key point here I think is, for the year, the real UPS – excuse – EU real exports are forecasted to grow at 4.8% this year in 2015.”

Overall US is mixed

when it comes to the US, the outlook is certainly mixed. I mean there were some recent disappointing employment news in March and we’ve seen IP and the retail data maybe be not as positive as we would have thought.

There are some headwinds. We talked a little bit about the West Coast Port, don’t know if that’s going to fade away pretty quickly of if this is going to continue. But the strengthening US dollar and the cautious consumer when it comes to spending, but then on the bright side, you see that, ASMO has gotten off to a strong start this year. January over 14% and February, almost that same level. So, I would say that, it’s just a mixed performance.”

We’re a great example of a company burdened by US taxes

“certainly, we continue to look at our tax structure in the very high statutory rate of the US is a drag on US companies. And certainly, we are a great example of that. So, David constantly ask me that question and we do what we can. But, to some extent, we are a business where you have to operate where the volumes are. So there is not a tremendous amount of discretion.”

CFO says farewell

“I’ve had the great fortune from starting as a package driver to assuming the CFO role back in 2008 to have an incredible breadth of assignments and clearly it’s truly transformed both me and my view of the world.

And so, I’ve been honored to have served and helped position this company for the future. But I do know, it’s now time to get out of the way and allow more capable executives like Richard to takeover, little younger, little faster, little smarter.”

“As the official old-timer on the UPS team, I am already dreaming about having some leisure time to do some of the other things I love, maybe learn how to play piano, get in shape and certainly work on my ice fishing will be good places to start.”