UPS and Boeing results show how rising revenue, higher guidance or a larger backlog can coexist in one quarter with transformation charges, losses and thin segment margins.
Economics & Markets··Morning
Transformation charges at UPS
UPS reported second-quarter revenue of $22.8 billion and operating profit of $930 million, or $2.1 billion on an adjusted basis. Much of the gap came from $891 million of after-tax transformation charges, mainly separation costs tied to workforce reductions under the completed Driver Choice Program. US domestic revenue rose 6 percent, while reported operating margin was 0.1 percent and adjusted margin 8.0 percent. The company raised full-year revenue guidance to approximately $91.2 billion.[1]
Deliveries and losses at Boeing
Boeing reported second-quarter revenue of $24.6 billion and a loss per share of $0.67 under generally accepted accounting principles. It delivered 171 commercial aircraft; Commercial Airplanes produced $11.8 billion of revenue and a minus 2.7 percent operating margin. Total backlog reached $715 billion and included more than 6,200 commercial aircraft. The 737 program began transitioning to a production rate of 47 aircraft per month.[2]
Future volume, current cost
The companies' costs do not share one cause. UPS is reporting separation expenses while reconfiguring its network; Boeing is reporting thin or negative margins in its commercial-aircraft and defense programs. Higher guidance and a larger backlog therefore do not directly describe current-quarter profitability. Together, the results show how large operating systems can prepare for future volume while carrying substantial present costs at the same time as revenue grows.[1], [2]
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