UPS 1Q profit up 14 percent to more than $1 billion

AP News
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Posted: Apr 28, 2015 1:36 PM
UPS 1Q profit up 14 percent to more than $1 billion

DALLAS (AP) — UPS boosted first-quarter earnings by 14 percent as things like charging more for bulky but lightweight boxes helped increase U.S. revenue.

The domestic growth offset international revenue that was hurt because sales were less valuable when converted into the strong U.S. dollar.

The $1.03 billion profit beat Wall Street forecasts, although revenue was less than expected. The company stood by its forecast for full-year earnings.

The shares rose more than 3 percent in morning trading.

United Parcel Service Inc. said Tuesday that its net income equaled $1.12 per share and compared with profit of $911 million, or 98 cents per share, a year earlier. The average estimate of 15 analysts surveyed by Zacks Investment Research was for earnings of $1.09 per share.

Overall, revenue rose 1 percent to $13.98 billion, which was below the $14.32 billion forecast of nine analysts surveyed by Zacks. U.S. revenue increased 4 percent, but international revenue slid 5 percent, which the company blamed on the strong dollar hurting the value of sales made in foreign currencies.

Shipping volumes rose across the board. Fuel surcharges fell, reflecting lower diesel and jet fuel prices, but UPS more than offset that with higher base rates.

Partly, the company raised rates by charging more for big but light packages that take up valuable space in its trucks. UPS declined to say how much extra revenue the dimension-based pricing brought in, but it expects that to decline as shippers learn to pack more efficiently.

"It will be a transition where initially most customers are paying those surcharges as they adapt their shipping patterns and we help them to right-size their packaging," Chief Financial Officer Kurt Kuehn said in an interview. But in the first quarter, "It certainly was a significant pricing action. It did move the numbers a bit."

UPS also said that it decided not to renew an undisclosed number of shipping contracts that weren't profitable enough. The company did not identify the shippers, but indicated that the contracts usually involved delivering packages that were lightweight and low revenue per box.

The company repeated its forecast of full-year earnings between $5.05 and $5.30 per share. Helane Becker, an analyst with Cowen and Co., said the pledge was good news for investors because UPS has struggled to hit growth targets before.

"The test for UPS will be whether they can handle the uneven demand of the peak shipping season" during the fourth-quarter holidays, Becker said.

Separately, UPS announced that Kuehn, 60, will retire on July 1 after 38 years with the company including eight as CFO. He will be replaced by Richard Peretz, 53, currently the company's controller and treasurer.

Shares of Atlanta-based UPS were up $2.97, or 3.1 percent, to $100.40 in afternoon trading. They began the day down 12 percent since the start of the year, compared with the 2 percent increase in the Standard & Poor's 500 index.