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UPS beats estimates on U.S. package volumes, higher rates

By Mary Schlangenstein
Bloomberg News

United Parcel Service Inc., the world’s largest-package delivery company, posted third-quarter earnings Friday that beat analysts’ estimates after carrying more U.S. shipments at higher rates.

Net income more than doubled to $1.1 billion, or $1.16 a share, Atlanta-based UPS said, affirming a full-year forecast for per-share earnings in a range of $4.65 to $4.85.

Analysts projected profit of $1.15 a share for the quarter and $4.75 for 2013, based on estimates compiled by Bloomberg.

While UPS reaped less revenue from each international package, it reported a gain on that basis for domestic parcels along with an increase in U.S. volumes. UPS, considered an economic bellwether because it moves a variety of goods worldwide, projected fourth-quarter growth of 3 percent to 4 percent for daily U.S. shipments and revenue.

“Looking to the fourth quarter, although some major retailers have expressed caution about holiday spending, they still expect robust online sales,” Chief Financial Officer Kurt Kuehn said in a statement.

UPS didn’t give a forecast for 2014.

Shares are up about 28 percent this year, topping the 23 percent advance for the Standard & Poor’s 500 Index while trailing the 43 percent gain for FedEx Corp., the operator of the world’s largest cargo airline.

U.S. domestic package revenue rose 5 percent to $8.3 billion, buoyed by a 6.6 percent gain in sales for the ground-delivery business. Shipments increased by 2.3 percent, and revenue from each domestic parcel climbed 1 percent.

The number of deferred international shipments climbed 11 percent as customers extended a shift away from more costly express deliveries, the company said. Export volumes from Asia were unchanged, and revenue from international packages declined 0.3 percent.

Also weighing on operating profit were a $75 million negative impact from unfavorable foreign currency exchange rates and higher fuel prices. A year earlier, earnings per share were 48 cents as a result of an after tax, non-tax charge of $559 million related to pension liabilities.

UPS said in July it was trimming main aircraft routes out of Asia, reducing miles driven and lowering headcount through attrition and slower hiring to reduce costs. Some discretionary spending also was cut, although UPS declined to put a dollar value on the changes.

FedEx, which operates the world’s biggest cargo airline, has trimmed capacity between the U.S. and Asia twice and said in September it would seek more ways to reduce spending. Those changes are on top of a program begun in 2012 to lower operating costs by $1.7 billion over three years to combat the move away from overnight shipments.

UPS said Friday it expects daily shipping volumes to rise 8 percent during the peak shipping period between Thanksgiving and Christmas, led by growth in online shopping, according to a separate statement. The company expects package pickups to peak on Cyber Monday, Dec. 2, at 32 million.

Deliveries will peak on Dec. 16 at more than 34 million packages.

UPS also said it would add 55,000 seasonal employees to handle the increase.

FedEx on Oct. 23 estimated it would handle more than 85 million shipments the week of Dec. 1-7, up 13 percent from last year’s busiest week. The Memphis, Tenn.-based shipper, which plans to hire more than 20,000 seasonal workers this year, expects its busiest day to be Cyber Monday, Dec. 2, on growing purchase from online retailers.


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