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UPS surges most since 1999 on delivery boom spurred by virus

United Parcel Service Inc. climbed the most in more than 20 years as the courier’s results easily topped Wall Street’s expectations on pandemic-induced demand for e-commerce deliveries, health care equipment, and goods from Asia.

Revenue jumped 13 percent to $20.5 billion in the second quarter, exceeding the highest analyst prediction. Adjusted earnings were double the average of estimates compiled by Bloomberg, and new chief executive Carol Tomé signaled her focus on profitability with a vow to make UPS “better, not bigger” as a shift toward home deliveries threatens to squeeze margins.

The Atlanta-based courier and rival FedEx Corp. have been in overdrive since the novel coronavirus swept the world this year, handling soaring residential deliveries while rushing personal protective equipment to hospitals. Both companies applied peak-season-style surcharges on large customers as demand jumped and new expenses arose that were needed to protect employees and keep sorting hubs free of the virus.

UPS shares soared 14 percent to close at a record $141.46, the biggest daily gain since the company’s first day of trading in November 1999. That pushed the shares to a 21 percent advance so far this year, while the S&P 500 Index rose less than 1 percent.

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Adjusted earnings climbed to $2.13 a share in the second quarter, the company said in a statement, compared with the $1.07 average of analyst estimates.

UPS’s average US volume climbed 23 percent to 21.1 million packages a day, driven mostly by a 65 percent jump in US residential deliveries.

“At the beginning of the second quarter, we assumed demand would slow. Instead, we saw just the opposite,” said Tomé, who took the reins June 1.

“Due to ongoing COVID-related sheltering in place, retail store closures, and changes in US consumer spending fueled by the economic stimulus, we experienced unprecedented demand and record-high volume levels,” she said during a conference call with analysts.

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Still, the increase in home deliveries weighed on the adjusted domestic profit margin, which fell to 9.3 percent from 11 percent a year earlier. That’s because residential service has fewer packages per stop than commercial and requires drivers to travel more between locations.

But Newman warned that revenue growth would slow in the second half. US domestic profit margins will likely be lower than in the first half because of increased worker pay and benefit expenses and one-time gains a year earlier, he said. UPS hired 39,000 workers in the second quarter to deal with the demand surge.

FedEx has also gotten a boost from the pandemic-related demand and saw revenue soar 20 percent at its US ground delivery unit during the fiscal quarter ending May 31. FedEx rose 1.9 percent to $172.71.