Editor's note: This article has been updated with comments by UPS executives on their earnings conference call.
UPS said Tuesday revenue rose but profit fell in the first quarter as the shipping giant withdrew financial guidance for 2020 because of global uncertainty.
The Sandy Springs-based company is cutting capital expenditures by $1 billion and suspending share buybacks for the year, saying it “is unable to predict the extent of the business impact or the duration of the coronavirus pandemic, or reasonably estimate its operating performance in future quarters.”
The coronavirus created a $140 million drag on the results in the first three months of the year.
“We know we’ll move into a recovery phase. We just don’t know when,” said Chief Financial Officer Brian Newman during an investor conference call.
He said the company does not plan to seek aid from the federal CARES Act “as we are confident in our ability to manage UPS’s liquidity.” The company raised funds by issuing $3.5 billion of debt in March, and also plans to continue paying dividends to shareholders.
UPS delivers cargo and packages around the U.S. and the world on its airplanes and trucks, making it a key gauge of the global economy and trade. It is also leading the pandemic logistics response for the Federal Emergency Management Agency and other U.S. government agencies.
The company's quarterly revenue increased to $18 billion from $17.1 billion between January and March, due to increases in shipments to consumers and growth in health care shipments. But net income decreased to $965 million from $1.1 billion a year earlier.
“This crisis touches all part of our business,” said CEO David Abney, who retires June 1 and will be succeeded by former Home Depot CFO Carol Tomé.
Its U.S. domestic business faced first-quarter headwinds from businesses closed by COVID-19, disrupted supply chains and higher self-insurance expense. While deliveries to doorsteps increased, lucrative commercial deliveries declined. That resulted in "an unprecedented shift in customer and product mix," UPS said, causing a decline in revenue per piece.
Residential deliveries now make up nearly 70% of UPS's volume, and Abney said UPS is helping companies including Target adapt to surging e-commerce demand. But it's also less efficient to deliver individual packages to homes than to deliver pallets of goods to retailers and other businesses.
International revenue declined amid weaker global economic activity as the pandemic spread from Asia to other parts of the world. The company saw volume in China rebound in March, offsetting declines in January and February, with growth in health care, high-tech and e-commerce in particular.
UPS’s supply chain and freight business also saw a decline in revenue, with volumes in the latter business falling toward the end of March due to stay-at-home restrictions and closed businesses. The company said it is working to get more customers in health care, start aircraft charters from Asia and impose peak surcharges.
Despite the global upheaval in trade and travel, UPS said it is continuing operations around the world. It has been designated as a critical infrastructure business by governments and is delivering masks and personal protective equipment for FEMA, driving an increase in its cargo flights to the U.S. and Europe.
“People are counting on UPS more than ever before,” Abney said.
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