UPS Profit Tops Estimates Amid Boost From Online-Shopping

United Parcel Service Inc. posted higher first-quarter earnings than analysts estimated as the world’s largest package-delivery company carried more purchases to online shoppers.

Profit of $1.04 a share, excluding some costs and gains, topped the $1.01 average estimate from analysts. The Atlanta-based company also reiterated its full-year forecast of $4.80 to $5.06, which compared with the $4.99 average of 30 estimates from analysts.

UPS benefited from a 4.4 percent increase in domestic deliveries driven by consumer purchases and returns of items such as clothing and electronic devices. That helped push sales up 2.3 percent to $13.4 billion. The company handles more than 16 million packages and envelopes a day worldwide, making it a bellwether for the economy.

“It was a so-so quarter, and it’s been that way for a few quarters,” said Logan Purk, an analyst at Edward Jones & Co. in St. Louis, who has a hold rating on the stock. “The U.S. business seems to be doing just fine, but international markets are weak on volumes and yields. The results were buoyed by domestic.”

Profit in the U.S. package delivery business climbed 9 percent while the operating margin expanded 70 basis points to 13.1 percent. The international package unit’s earnings dropped 4.2 percent, excluding charges from the company’s attempt to purchase TNT Express NV.

UPS paid TNT a breakup fee of 200 million euros ($261 million) in the first quarter after dropping the 5.16 billion-euro deal when European regulators moved to block it.

U.S. Economy

“Domestically, we’re fairly confident the U.S. economy will be stable, if unexciting,” Chief Financial Officer Kurt Kuehn said on a conference call today. “International trade flows are volatile so we have to be aware of that.”

As some customers shift from next-day shipments to cheaper services, UPS is expanding in high-margin deliveries of health-care products. The company said today that it bought a Hungarian pharmaceutical logistics firm called Cemelog Zrt, which adds 250,000 square feet of space and 270 employees that will help UPS distribute more drugs and medical devices in eastern Europe.

The purchase brings UPS’s dedicated health-care space to 6.5 million square feet globally, executives said.

UPS climbed 2.3 percent to $85.42 at the close of today’s trading in New York. The shares rose 5.1 percent in the 12 months through yesterday, compared with a 6.2 percent gain for FedEx Corp. and 15 percent for the Standard & Poor’s 500 Index.

Including an after-tax benefit from a currency gain, UPS’s net income rose 6.9 percent to $1.04 billion, or $1.08 a share, from $970 million, or $1.

Demand in January benefited from customers returning holiday purchases through the UPS Returns service, UPS said. The company also introduced Access Point locations in the United Kingdom to give customers alternatives to receiving deliveries at home.

(Updates with analyst’s comment in fourth paragraph.)
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