UPS CEO discusses role in Covid-19 vaccine distribution process

UPS CEO Carol Tome breaks down how the shipping giant is helping in the logistics of Covid-19 vaccine distribution, saying that the company has delivered 36.5 million vaccines to sites thus far.
To see the full interview with Tome on UPS Q4 results sign up for a free trial to CNBC Pro: https://cnb.cx/36HzFQB

Shares of UPS rose more than 4% on Tuesday after the company reported better-than-expected revenue and profits over the busy holiday shopping season, reflecting a boom in online shopping due to the Covid-19 pandemic.

Revenue for the Atlanta-based logistics and delivery company jumped 21% to $24.9 billion during the fourth quarter ended Dec. 31, a record for UPS as it navigated unprecedented e-commerce sales over the holidays. The company posted revenue of $20.6 billion during the same quarter in 2019.

The domestic package division saw a 17.4% increase in year-over-year revenue as its network filled to the brink with packages from online retailers, including Amazon.

“Looking at the fourth quarter, our results were strong and considerably better than we expected,” CEO Carol Tome said on the company’s earnings call following the report. “This is the highest quarterly operating profit in the company’s history, with record profit produced in each segment.”

Here’s how UPS did during the fourth quarter compared with what investors expected, based on estimates compiled by Refinitiv:

Adjusted EPS: $2.66 per share vs. $2.14 expected.
Revenue: $24.9 billion vs. $22.87 billion expected.
The company reported a sizable loss of $3.26 billion during the quarter after disclosing $5.6 billion in charges. Those costs included a $4.9 billion mark-to-market pension charge, a $114 million after-tax impairment charge and a $545 million impairment charge related to the company’s sale of UPS Freight.

The sale of its freight division was in line with Tome’s goal to make the logistics giant “better, not bigger.”

Tome, who took the company’s top job in June, said on the earnings call that UPS Freight is “a capital intensive, low returning business,” and its sale should provide a better operating margin and return on invested capital in the future.

UPS did not provide an outlook on its future earnings due to ongoing uncertainty from the pandemic. However, Tome said e-commerce sales as a percentage of total retail sales will remain strong.

The results come off of a record-breaking shipping season fueled by the pandemic. Shoppers were tempted with holiday sales as early as October to spread out the number of packages in the system at any one time.

At times, UPS told drivers to stop picking up packages at some large retailers like Nike and Gap after they exceeded capacity allocations set by the delivery company. UPS also instituted surcharges in an attempt to offset higher costs associated with the increased package volume and pandemic.

In December, shares of shipping rival FedEx slid after it reported its fiscal second-quarter earnings. Higher operating costs left Wall Street disappointed despite beating revenue and profit estimate.

UPS’ adjusted operating margin grew slightly during the quarter to 11.5%, though the margin for its domestic shipping unit fell slightly to 8.8%.

On top of holiday deliveries, UPS and rival FedEx began shipping Covid vaccines from Pfizer and Moderna across the U.S. in December, bolstering their health-care delivery businesses. Tome said UPS has been able to provide “above 99% service” for Covid vaccine deliveries so far.

“As we look past 2020 into the new year, we are optimistic. During the fourth quarter, we began transporting COVID-19 vaccines and we stand ready to deliver hope and health to people around the world,” Tome said.

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