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Record International operating profit, led by Europe
UPS has reported Q4, 2015 adjusted diluted earnings per share of US$1.57, a 26.0% increase over adjusted Q4, 2014 results. All three business segments expanded operating margins and generated double-digit operating profit growth.
For the full year, UPS achieved adjusted diluted earnings per share of US$5.43, an increase of 14.0% over 2014 adjusted results. Included in these results were several discrete tax credits that increased the earnings per share by about US$0.07 for the quarter and a total of US$0.10 for 2015.
Total revenue in Q4, rose slightly, to US$16.1 billion. Revenue growth was slowed by currency translations and lower fuel surcharges. On a currency-neutral basis, revenue was up 2.4% compared to the same period last year. Revenue management initiatives continue to improve base rates across all segments.
UPS delivered 1.3 billion packages during Q4, an increase of 1.8% over the same period last year. For calendar year 2015, the Company delivered 4.7 billion packages, up 2.1% over 2014. During peak season 2015, UPS delivered 612.0 million packages.
US Domestic revenue increased 2.6%, to US$10.3 billion. Lower fuel surcharge rates reduced revenue growth by about 250 basis points. Revenue per package increased slightly to US$8.89. Base rates driven by company actions remain strong while changes in fuel surcharges and customer mix lowered revenue-per-package growth. Strong demand from eCommerce shippers contributed to a 2.4% increase in average daily shipments. Deferred Air products soared 15.0% and Next Day Air was up 10.0% over the same period last year. UPS completed deliveries to more than 1.9 million new addresses during December, demonstrating the growing influence of online retail. Adjusted operating profit increased US$209.0 million, or more than 18.0% over Q4, 2014 adjusted results. Operating margin expanded 170 basis points, to 13.1%, on an adjusted basis. The Company’s focus on revenue quality, combined with better network performance, resulted in improved operating leverage this quarter. On a reported basis, operating profit increased US$840.0 million, or 189.0% with operating margin of 12.5%, as a result of mark-to-market pension entries mentioned above.
International Package adjusted operating profit was up 16.0%, to US$624.0 million, in Q4, led by strong performance in Europe. Disciplined pricing, favourable customer and product mix, combined with improved operational performance, drove increased profitability. For the first time, the International segment surpassed US$2.0 billion in annual adjusted operating profit. UPS’s focus on more-profitable accounts led to improved base rates across all regions. On a currency-neutral basis, revenue per package was down 0.9% compared to Q4, 2014. Lower fuel surcharge masked revenue per package growth by approximately 350 basis points and offset strong growth in base rates. Export shipments increased slightly, led by mid-single digit growth in the Europe and Americas regions. Growth in Europe transborder products and exports to the US offset a drop in US and Asia exports. On a reported basis, operating profit increased US$245.0 million, or 73.0%, as a result of mark-to-market pension entries.
Supply Chain & Freight adjusted operating profit increased 11.0%, to US$199.0 million over adjusted 2014 fourth-quarter results. Total segment revenue increased 6.0% to US$2.6 billion. The inclusion of Coyote Logistics revenue for the full quarter more than offset the impact of softer markets, lower fuel surcharges and actions to improve revenue quality in the other business units. Freight Forwarding generated increased operating profit and margin expansion despite declines in tonnage. International Air Freight benefitted from revenue quality initiatives, which when combined with a drop in buy-rates resulted in the best pricing spreads in several years. UPS Freight LTL revenue per hundredweight increased 2.1%. Lower fuel surcharges drove the growth rate lower by about 550 basis points. This improvement was offset by a 12.0% tonnage decline that lowered revenue. UPS continues to focus on profitable revenue in a challenging market environment. On a reported basis, operating profit for the segment increased US$212.0 million as a result of mark-to-market pension entries.
This was the fourth consecutive quarter that UPS exceeded financial expectations. Looking ahead, while there are uncertain macro-economic conditions, UPS is continuing to invest for profitable growth. Guidance for 2016 full-year diluted earnings per share is US$5.70 to US$5.90 an increase of 5.0% to 9.0% over adjusted 2015 results. Excluding the 2015 discrete tax credits, the growth rate is 7.0% to 11.0%.