Analyst Note| Matthew Young, CFA |
Wide-moat UPS posted solid first-quarter top-line growth near 27% year over year, ahead of our forecast due to better-than-anticipated mix benefits to yields. Continuing the theme of previous quarters, the pandemic has driven a surge in residential package-delivery demand across most segments. Additionally, domestic and international B2B activity is improving sequentially on gradual industrial end-market recovery. Also, international package business continues to enjoy tailwinds from limited airlift capacity and healthy export demand. Total package yield surged 11% on rising (and sticking) surcharges, constrained last-mile network capacity (greater pricing power), and accelerating demand from higher-yielding small and midsized customers. Domestic yields rose 10% (8% last quarter), while international yields gained 12%.