Daily Archives: May 10, 2018

Severe Winter Weather Weighs Heavily On UPS Profits

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If you are going to ship a parcel domestically or internally, it is important to compare parcel delivery costs to gain the best deal. Making comparisons is easier when done online because the process only requires parcel collection and delivery details including information on the estimated weight and dimensions of the parcel.

According to UPS their first quarter net profit was relatively high because of strong package volumes from the core US segment; however, delivery costs were also higher because the severe winter weather that weighed heavily on the profits. According to the world’s largest parcel delivery company, their revenue increased by 10% to $17.1 billion compared to a year ago. Revenue exceeded the expected $16.47 billion.

However, the severe winter weather impacted heavily on operating profit by $85 million. Expenses for network improvements were also high including pension costs and expansion of Saturday deliveries. Taking everything into consideration, operating profits in the core domestic segment went down by 20% or 6% overall.

Helane Becker, analyst of Cowen & Co., higher costs can certainly affect earnings. Generally, the company struggles with capacity issues during the weeks before Christmas which is considered as peak season for parcel delivery companies. Unless performance improves, companies will experience issues in achieving their EPS targets.

UPS which is also considered as an indicator of the country’s economic strength and consumer demand has promised to deliver higher margins by investing billions of dollars into network upgrades and expansion to be able to handle the continuous growth of ecommerce. The significant increase in online shopping has certainly increased demands for shipping.

Meanwhile, UPS is struggling in bringing down extra costs of delivery to households that receive fewer packages compared to businesses. It appears that UPS is trying to bring down shipping costs because it is difficult to predict the next step that Amazon and other shippers will make.

A consumer that makes the effort to compare parcel delivery quotes is more likely to save on freight costs. Even if the parcel is to be shipped domestically, it makes sense to compare costs because there are discounted shipping services that are lower than what the competition offers.