UPDATE: UPS profit, revenue soared in 1Q amid pandemic shipping surge

Online shopping, vaccine shipments buoy package delivery giant

UPS continued riding a wave of skyrocketing shipping demand from online shopping and vaccine deliveries in the first quarter of the year, with both profit and revenue soaring.

Sandy Springs-based UPS reported $4.8 billion in net income for the first three months of the year, up from $965 million a year earlier. A $2.4 billion pension accounting adjustment also drove results sharply higher.

The strong first-quarter report came after UPS booked record revenue for 2020 amid a pandemic that weakened many companies’ financial results.

However, the package delivery giant declined to forecast its revenue or profit for the year, due to “continued economic uncertainty.”

UPS also plans to reduce its non-operating expenses by $500 million this year, said chief financial officer Brian Newman during an investor conference call Tuesday. That includes a reduction of $80 million in the first quarter after about 1,700 managers took buyouts that took effect mostly late last year and early this year.

The company has about 540,000 employees overall, including close to 300,000 drivers, package handlers and mechanics.

UPS reported $22.9 billion in revenue for the first quarter, up 27% from its $18 billion in revenue in the year-ago quarter. That came from a 14.3% increase in the number of packages it carried and an 11.4% increase in average revenue per package.

It also delivered more than 1.1 million COVID-19 vaccine shipments to about 50 countries and territories, CEO Carol Tomé said.

The company’s $2.4 billion mark-to-market pension benefit in the first quarter was the result of the COVID-19 stimulus package signed into law in March 2021 as the American Rescue Plan Act, which among other measures aimed to prevent certain pension plans from becoming insolvent. That resulted in a reduction in UPS pension liability.

The company had operating expenses of $20.1 billion in the quarter, up 18.7% from $17 billion a year ago.

A key benefit for UPS if the economy fully recovers from the pandemic would be the return of more business-to-business shipments as additional retail shops reopen, since it costs UPS less to deliver a bulk shipment to a business than to drop off myriad individual packages to doorsteps. This year, UPS expects retail sales to grow 11.7%, while online sales are forecast to grow 12.7%, down from 24% growth in 2020.

UPS is also keeping a wary eye on new players entering the parcel delivery market, including Uber Direct retail deliveries and Door Dash’s DashMart.

Tomé said “long gone are the days” when UPS sees its competitors as limited to major players such as FedEx and the U.S. Postal Service. “Everybody wants a little piece of the pie, and our job is to keep them out of the pie that we want to eat,” she said.