U.S. ecommerce, price hikes lift UPS profit but shares fall on outlook

  • In World/Europe
  • 2017-07-27 15:06:50Z
  • By By Eric M. Johnson and Nick Carey
FILE PHOTO: United Parcel Service air craft are being loaded with air containers in Louisville
FILE PHOTO: United Parcel Service air craft are being loaded with air containers in Louisville  

By Eric M. Johnson and Nick Carey

SEATTLE/DETROIT (Reuters) - United Parcel Service Inc on Thursday reported a higher-than-expected quarterly net profit due to rising ecommerce deliveries but investors worried about the company's performance in the back-half of the year and shares fell 3.1 percent.

The world's largest package delivery company said quarterly revenue at its core U.S. domestic package service rose 8 percent to $9.7 billion. Revenue per package in the domestic unit was up 3 percent, reflecting raised prices.

Like its main rival FedEx Corp, UPS has experienced a boom in ecommerce packages over the last decade. But both companies have had to invest heavily in their networks.

Atlanta-based UPS posted second-quarter net income of $1.4 billion or $1.58 per share, up nearly 8 percent from $1.3 billion or $1.43 per share a year earlier. Analysts had expected earnings per share of $1.47, according to Thomson Reuters I/B/E/S.

Higher fuel surcharges and workers' compensation contributed 10 cents per share to earnings in the quarter.

Despite the beat, UPS kept its forecast unchanged.

The company expects full-year earnings per share in a range from $5.80 to $6.10. Analysts expect earnings per share for the year of $5.95.

"The back half of the year appears a little weaker than investors had expected and that's the overhang on the stock," said Ben Hartford, analyst with Robert W. Baird & Co in Milwaukee. "Investors are wrestling with the fact that they did not change the full-year guidance."

The company said revenue in its international segment was up 2.8 percent because of export growth in Asia and Europe but operating profit fell nearly 5 percent.

FedEx said it was experiencing a disruption in services in its Netherlands-based TNT Express unit following a cyber attack in June. Earlier this month, FedEx said the attack would hurt its full-year results.

UPS executives were asked on a conference call with analysts whether the company has seen an uptick following the attack.

"Straight up, yes, we are seeing more business recently in Europe," UPS Chief Information Officer Juan Perez said.

Revenue in the supply chain and freight segment was up 12 percent, reflecting improving market conditions.

The company said it was investing more in its network to handle the additional volume associated with online purchases.

Like FedEx, UPS has struggled with the expense of "the last mile" associated with delivering to residential addresses. The cost per package to businesses is typically lower because they receive more deliveries.

(Reporting By Nick Carey and Eric M. Johnson; Editing by Nick Zieminski)


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