UPS 4Q15 Earnings Call Notes

United Parcel Service’s (UPS) CEO David Abney on Q4 2015 Results

We feel like we delivered the peak

“A year ago, we laid out a plan for successful peak in 2015. This year, through the extraordinary efforts of UPS’ around the globe, we delivered the high quality service that customers deserve and the financial discipline that shareowners expect.”

Collaboration with customers was key

“I want to spend some time discussing how we capitalized on our peak season opportunity by managing the challenges it creates. I can sum it up in three words: collaboration, control, commitment. Expanded collaboration with customers combined with key investments were central to our success.”

Global economic conditions remain uncertain

“Looking at the global economy, conditions remain uncertain with the first half of 2016 continuing the mixed economic trends from the last half of 2015. Across Europe and Asia, GDP growth was modest in 2015. However, slight improvements are expected this year. At the same time, we continue to see challenges in emerging markets in 2016.”

Richard Peretz

Expecting 6-8% revenue growth in 2016

“We expect 2016 to be another good year at UPS. Revenue should increase between 6% and 8%. Looking more closely at the segments, in the U.S., the domestic segment average daily volume should increase about 2% to 4%, driving revenue up 4% to 6%. ”

Alan Gershenhorn

Delivered 612m packages over the peak period

“Hey, Tom, this is Alan. Yes, certainly, it was a solid peak season. We delivered more than 612 million packages over the peak period. It’s the most in the company history, up about 7%.”

Inventory to sales ratio has come down slightly but is still elevated

“as you probably all know, the U.S. inventory sales ratio has come down slightly but it still remains elevated, certainly indicating we got continued overhang of inventories in the economy. And customers are obviously attempting to work them down.”

We can manage through weak IP better than in the past because we are up to 60% residential deliveries

“I think the story with industrial production has been happening now for quite a while. Certainly, it’s trending more negative than it has been. Our business today, as Rich said, even at peak season, we were up to 60% residential, so about half of our business is on the retail e-commerce side now. And I think we are going to be able to manage through that real well. I think the value proposition that we have in place for both retail and the other industry segments, including industrial manufacturing, high-tech and healthcare bode well.”

Jim Barber

Load factors do appear to be turning up recently

“If you look at about the last year, what we have seen is a continued gap of demand and capacity, but I would say in the last two months of data, what we started to see is some load factors turning up. So as that moves forward, now we also have Chinese New Year coming on us right know, so that will give us our second read. But from that perspective, I think as some of the guys mentioned earlier, the buy/sell spreads, which is reflective of capacity and demand have been at its widest point through 2015. But early indications, there is a little bit of turn towards the end of 2015.”