Are UPS Results Bad for the U.S. Postal Service?

UPS-vs-USPS_1Tuesday’s earnings report from United Parcel Service Inc. (NYSE: UPS) disappointed investors, not because the package delivery service missed estimates but because the company expects to invest more money to help it avoid the problems it had delivering packages during the past holiday season. Companies that invest in the future at the expense of paying off existing shareholders often get punished, and UPS was taken to the woodshed Tuesday.

UPS is getting a taste of what the U.S. Postal Service (USPS) gets from the U.S. Congress every time it reports a new quarterly loss (as it has in 19 of the past 21 quarters). The USPS actually generates more revenue than UPS — in the quarter ended in March USPS reported total revenues of $16.73 billion, up $377.4 billion compared with the prior year’s first quarter. UPS reported $13.43 billion in revenues in the same quarter, up $298 million compared with the prior year.

The big difference is the USPS received only $214 million in package services revenues, compared with $9.3 billion at UPS. The USPS gets the lion’s share of its revenues from First Class mail — $7.43 billion — and Standard mail — $4.23 billion. And the USPS is losing ground in the package shipping business. In the March quarter, package revenues fell 23%, while UPS domestic package revenue rose by about 3.2%.

In its second quarter, UPS’s domestic package revenues rose 5.2% to $8.7 billion. It is probably safe to assume that USPS revenues for the quarter will be lower when it reports quarterly results next month. Combined with consistently declining revenue from First Class and Standard mail, there is every reason to believe that the USPS will post a loss in the 20th of 22 quarters.

via Are UPS Results Bad for the U.S. Postal Service? – United Parcel Service (NYSE:UPS) – 24/7 Wall St..

One thought on “Are UPS Results Bad for the U.S. Postal Service?

  1. I witnessed this for myself as an Amazon Prime customer. With Amazon Prime, one of the excellent benefits is 2-day delivery on all Prime-eligible purchases. We unnecessarily lost parcel business to UPS by our failure to meet Amazon Prime customer needs for entry to doorstep step-by-step delivery tracking. This is what Amazon Prime customers expect, because that is what they got from UPS. As the USPS failed to meet the two-day delivery promise and the entry to doorstep tracking, UPS took those customers. Here is more evidence of where our customers are going:

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