UPS Surges After Profit Tops Estimates on Holiday Gain
UPS Profit Tops Analysts’ Estimates
Daniel Acker/Bloomberg
A truck enters the 1.5 million square-foot United Parcel Service Inc. Chicago Area Consolidation Hub in Hodgkins, Illinois.
A truck enters the 1.5 million square-foot United Parcel Service Inc. Chicago Area Consolidation Hub in Hodgkins, Illinois. Photographer: Daniel Acker/Bloomberg
United Parcel Service Inc., the world’s largest package-delivery company, climbed to the highest price in more than two years after an increase in holiday volume propelled fourth-quarter profit higher than analysts’ estimates.
Adjusted profit of $1.08 a share exceeded the average $1.05 projection of 23 analysts surveyed by Bloomberg. Revenue rose 8.4 percent to $13.42 billion, the Atlanta-based company said today in a statement, also outpacing analysts’ projections.
UPS said it handled 440 million packages during the peak holiday season between Thanksgiving and Christmas, more than its forecast of 430 million items, led by “strong demand” from online retailers. UPS and FedEx Corp. are considered economic bellwethers because they deliver items ranging from electronics and clothing to pharmaceuticals and industrial goods.
“There is no better read on the economy than UPS, and what this tells me is that business is growing at a reasonable rate,” said Jeff Kauffman, an analyst at Sterne Agee & Leach Inc. in New York, who recommends buying the stock. “Companies have gone from a foxhole mentality to strategic thinking again. Capital expenditure budgets are growing, they’re starting to hire. It’s not gangbusters, but it’s healing.”
UPS climbed $2.97, or 4.2 percent, to $74.59 at 4:15 p.m. in New York Stock Exchange composite trading, the highest since April 2008. UPS increased 28 percent in the past 12 months.
UPS forecast 2011 profit of $4.12 to $4.35 per share, compared with the $4.17-per-share average estimate of 25 analysts. The company also said it would repurchase about $2 billion worth of shares in 2011.
2011 Opportunities
“I’m encouraged by the opportunities we see in 2011 as UPS continues to expand into emerging markets,” Chief Executive Officer Scott Davis said in the statement.
International volume grew 4.8 percent in the quarter, with China up more than 30 percent, while domestic shipments increased 1.7 percent.
Freight revenue jumped 23 percent. Adjusted operating margins for freight and supply chain, which includes trucking shipments in which multiple customers share a single truckload, jumped to 7.7 percent from 1.4 percent a year earlier on better pricing and more weight hauled.
“There’s been a much more stable pricing environment,” Chief Financial Officer Kurt Kuehn said today in an interview. “Others who were very aggressive are starting to get more prudent and we’re starting to see volume come back into our network at an accelerated rate.”
UPS had an after-tax gain of $32 million related to the sale of its UPS Logistics Technologies unit to private equity firm Thoma Bravo LLC during the fourth quarter for an undisclosed sum. The unit creates transportation-routing and fleet-management systems under the name Roadnet.
Including that gain, UPS said net income rose 48 percent to $1.12 billion, or $1.11 a share, from $757 million, or 75 cents, a year earlier.
To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.
To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.
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