United Parcel Service (UPS) Class B Earnings Call Nuggets: UPS My Choice and International Package Side
UPS My Choice
Brandon Oglenski – Barclays Capital: I wanted to ask about your domestic profitability and how, even with the change in UPS My Choice, being able to ship SurePost packages to your ground network, how is that increasing the efficiency for you guys and the profitability outlook for the segment?
Kurt Kuehn – CFO: The My Choice is kind of a win-win situation. It’s a positive for customers in that it gives them control, and it’s a positive for our operations, because it allows us to pre-notify customers that packages are arriving. Myron, maybe you can talk a little bit about how that’s helping operations.
Myron Gray – President, U.S. Operations: In a previous call, we talked about how technology has continued to enable us to adapt and adjust and keep strong margins. One recent one that we spoke about was residential consolidation, where in the fourth quarter we were able to adjust in approximately 15% of our SurePost packages were then redirected with a UPS driver, which certainly enhanced our customer experience and allowed us to continue reduce cost.
Kurt Kuehn – CFO: So we’ll be continuing to leverage technology to both delight customers and maintain our economic profitability.
D. Scott Davis – Chairman and CEO: The real focus there is just increasing density, and we are doing a very good job of increasing density on the B2C.
International Package Side
Kevin Sterling – BB&T Capital Markets: Kurt or Scott, maybe you could just touch on the type of trends you are seeing, particularly on the international package side in April?
D. Scott Davis – Chairman and CEO: Well I’d say generally the international package volume flows have picked up in the fourth quarter last year and really carried through the first quarter, and we expect some of the same going forward the rest of the year. The big change in the middle two quarters last year we had negative trade flows. This year we’re seeing – we think, global trade growing faster than global GDP and we saw both in the fourth quarter and in the first quarter strong growth out of Asia, upper single digit growth, both to the U.S. and to Europe. So those trade flows were very weak last year. They’re better this year. So on the package side, we feel pretty good. The international air freight side, while the tonnage is growing slightly, still way too much capacity and the yields are weak.
A Closer Look: United Parcel Service Earnings Cheat Sheet>>