It’s earnings season for the U.S. Postal Service too.

The post office reported fiscal fourth-quarter numbers Thursday. The full year reported loss is enormous at $8.8 billion. But that’s only part of the story. Operating metrics were actually pretty good. And free cash flow was positive.

As is always the case with the USPS, the numbers are interesting (as well as confusing), and they hold important lessons for investors interested in shipping and logistics.

First the top-line: Postal sales grew slightly to $71.1 billion. That’s quite an achievement since first class mail volumes shrank another 3.1%. Package sales grew $1.3 billon, or 6.1%, on a 0.2% volume increase and a 5.9% increase in pricing. Price for parcels at the post office is always a useful read through for FedEx (ticker: FDX) and United Parcel Service (UPS).

The U.S. Postal Service intends to raise prices in its parcel shipping business by about 3% starting Jan. 26, 2020. The rate of change—while not reported directly—appears a little slower than 2018, but higher prices at the post office still help parcel competitors raise pricing.

Joseph Amato, president of Neuberger Berman, offers his perspective on how trade and interest rates could impact U.S. markets before the end of the year.

Turning to costs, the post office doesn’t account for certain expenses like other publicly traded businesses. About $5.5 billion of the full-year loss came from changes in accounting accruals mandated by Congress, as well as falling interest rates used to calculated some labor liabilities.


On a comparable basis, the post office loss grew from about $2 billion to $3.4 billion from 2018 to 2019. Wage costs grew about $1 billion, or 2.1%. The problem for the USPS is sales growth doesn’t match cost growth because people are sending less and less traditional mail. First class, marketing, and periodical mail sales fell by about $750 million year over year.

Fortunately, cash flow at the post office looks much better than earnings. Again, the difference between cash and earnings at the USPS is massive because of all the unusual accounting adjustments. Free cash flow—which is cash generated from operations less capital spending—amounted to about $1 billion in fiscal year 2019, down from $1.4 billion in 2018.

Interested stakeholders can get more detail (and accounting explanations) from Postmaster General and USPS CEO Megan Brennan and CFO Joseph Corbett. They’re holding a conference call to discuss the financial results at 11:30 a.m. ET.

This might, however, be the last earnings call for Brennan. The CEO is slated to retire in January. Brennan actually started her career as a letter carrier. The post office board of governors is responsible for selecting her replacement.


Write to Al Root at allen.root@dowjones.com