UPS Profit Lifted by Pricing, Maintains 2015 Earnings Outlook
United Parcel Service Inc on Tuesday reported higher first-quarter net profit due to price increases and productivity improvements, and reaffirmed its earnings outlook for 2015.
Atlanta-based UPS said profitability improved across all business segments, though revenue growth in its supply chain and freight business was slowed by a strong U.S. dollar and lower fuel surcharges.
UPS shares rose 2 percent to $99.34.
The world's largest package delivery company posted a first-quarter net profit of $1.03 billion, or $1.12 per share, up 10 percent from $911 million, or 98 cents per share, a year earlier.
Analysts expected earnings per share of $1.09 for the quarter.
UPS posted revenue of $14 billion, below Wall Street analysts' expectations of $14.3 billion.
The company said it continues to expect earnings per share of between $5.05 and $5.30 for 2015. Analysts have predicted earnings per share of $5.15 for the year. UPS said it was on track to achieve long-term financial goals, previously stated as annual earnings per share growth between 9 percent to 13 percent.
UPS' first-quarter profit beat came after a difficult fourth quarter in which the company overspent preparing for a holiday peak season package surge that failed to materialize.
After that disappointing result, UPS said it would apply peak season surcharges. During an analyst call on Tuesday, the company said surcharges would apply to residential packages and were included in its full-year earnings guidance.
Earlier this month, its main rival, FedEx Corp, announced it would buy Dutch package delivery firm TNT Express . A 2013 UPS bid to buy TNT was blocked by regulators. If FedEx's acquisition of TNT is approved, it would become the second largest package delivery firm in Europe after Deutsche Post's DHL, knocking UPS into third place.
UPS said revenue at its key domestic U.S. package service rose to $8.8 billion in the first quarter, up 3.8 percent from $8.5 billion in the year-ago period. Revenue per package rose 1.3 percent, aided by a change in "dimensional weight pricing." The new pricing system, which FedEx has introduced, punishes e-commerce vendors for using excessive packaging for small items and taking up too much space on package delivery vehicles.
Chief Financial Officer Kurt Kuehn, who will retire in July, told analysts U.S. package volumes should grow 3 percent this year. (Reporting By Nick Carey; Editing by Franklin Paul, Paul Simao and Nick Zieminski)