UPS 2Q16 Earnings Call Notes

United Parcel Service’s (UPS) CEO David Abney on Q2 2016 Results

B2C strong B2B not as much

“Turning to the economy, the consumer market in the U.S. remains healthy and e-commerce forecasts have been elevated for 2016. And we’re seeing that growth. On the other hand, our B2B volume is affected by the continuing weakness in industrial production. In fact, global GDP and industrial production growth forecast have been downgraded slightly. Delayed inventory drawdowns and soft export demand likely will remain headwinds in the latter part of 2016. ”

Mindful of political commentary on trade

“Additionally, we’re mindful of the current political commentary on trade. Increased trade not only bolsters business but also produces jobs here in the U.S. and abroad. Historically, following ratification of trade deals we have seen about a 20% increase in U.S. exports to the countries involved. UPS is a steadfast proponent of trade and supports agreements that minimize friction in the global supply chain. Trade legislation to accelerate economic expansion like the Trans-Pacific Partnership is vital to the health of the U.S. economy. We encourage our political leaders to support and pass pending trade legislation.”

Consumers want alternative delivery locations

“We recently released the fifth annual U.S. Pulse of the Online Shopper study that highlights some of these changing trends. This year’s survey revealed that most shoppers prefer home delivery while also expressing an interest in an alternative delivery location. To provide more delivery options, UPS is expanding our Access Point locker program in several major U.S. markets. ”

Brexit adds some complexity but our job is to simplify the complex

” Brexit we don’t see changing that for that market, quite frankly. Our job is to continue that priority, number one, to take care of that economy and the consumers, our employees and the shareholders and link it into that European network. So that is priority one. The issue obviously becomes what the free-trade agreement is set up to be. Don’t forget a couple of things from my perspective, one is there are many, there’s a number of free-trade agreements in that union, as well. You’ve got the Norway model, you have got the Swiss model and you’ve got the EU model. So how it unfolds we will see but there are various models that could unfold. We’ve analyzed scenarios as far left as the WTO setup all the way back to something close to what they have today. In the end I think our priority is to advise and advocate and support consumers at the free-trade agreements are finalized in the coming years and then continue to whatever happened support that market in the network. I think we could easily say there will be somewhat more complexity but I think our job is to simplify the complex in a network for consumers and continue the great service. And that’s what we plan to do as that unfolds.”

Alan Gershenhorn

Seeing a slight increase in B2B

On the commercial B2B side we did see a slight increase. The good news is we’ve seen a slight increase the last few quarters there. It’s mainly being driven actually by the retail sector and returns but we’re seeing some growth in some other areas. Wholesale, healthcare and professional services are some of the other areas and then also consumer and home goods. As you know industrial production, as David indicated, was pretty soft and B2B is really being driven now by retail and some of those other sectors that I have spoken about.