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Bellwether UPS sees 1Q profit rise 7 percent

Published April 25, 2013 7:23 pm

Shipping • Company among those considered a good gauge of economy.
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Dallas • Consumers who kept spending after the holidays ended helped boost profit at UPS.

United Parcel Service Co. said Thursday that first-quarter profit rose 7 percent to $1.04 billion. Its adjusted profit beat analysts' expectations and shares rose more than 2 percent.

Daily package volume in the U.S. increased and company revenue rose 2.3 percent to $13.43 billion. But international revenue was flat as some customers switched to cheaper shipping options.

Big delivery companies, including UPS are seen as gauges of the economy because of the wide range of products they ship, everything from auto parts to consumer electronics.

A big part of UPS' business involves delivering packages from retailers to consumers, especially for gifts purchased before the holidays.

"The last couple of years we've begun seeing this phenomenon where there's continued buying after Christmas, and it really peaked this year into the second week of January," Chief Financial Officer Kurt Kuehn said in an interview.

Kuehn said the January increase was a combination of consumers shopping for post-holiday bargains, people returning gifts, and others making purchases with gift cards.

UPS' net income worked out to $1.08 per share, compared with $970 million, or $1 per share, a year ago. Excluding special items including those related to a failed attempt to buy Dutch delivery company TNT Express, the company would have earned $1.04 per share. That topped the $1 per share that analysts expected, according to a FactSet survey.

Atlanta-based UPS maintained its outlook for a 2013 adjusted profit between $4.80 and $5.06 per share. Analysts expect $4.98 per share.

Standard & Poor's analyst Jim Corridore said UPS was hurt in the first quarter by a shift toward less-profitable shipping services, "but volume growth was encouraging."

UPS' international air freight business continued to face pressure from customers opting for slower but cheaper delivery options, particularly in Asia.

Closer to home, airlines have struggled this week with delays caused by a slowdown in the federal air traffic control system. The Federal Aviation Administration began furloughing controllers on Sunday to comply with automatic government spending cuts.

Executives said UPS wasn't affected by the slowdown because many of its cargo flights are at night when control towers are less hectic. They did express concern that budget cuts could eventually reduce shipments by the federal government, a big customer.

Shares of UPS rose $$1.92, or 2.3 percent, to $85.42 in trading Thursday.






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