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United Parcel Service, Inc. : UPS 2Q Net Up 2.2% on Strength in US, Cuts Year View

07/24/2012 | 08:21am US/Eastern
   By Saabira Chaudhuri 
 

United Parcel Service Inc.'s (UPS) second-quarter profit rose 2.2% the package giant saw a stronger performance from its U.S. package segment, offsetting weakness overseas.

But the company reduced its per-share earnings guidance for the year to $4.50 to $4.70 a share from its April guidance of $4.75 to $5 a share.

"Increasing uncertainty in the United States, continuing weakness in Asia exports and the debt crisis in Europe are impacting projections of economic expansion," Chief Executive Scott Davis said.

Shares slipped 3.3% to $75.38 in recent premarket trading as results also missed expectations. The stock is up 6.5% so far this year.

UPS continues to face a weak global air-freight market, which has suffered from slumping volume in Asia and a drop in exports to the U.S., though the shipping company said earlier this year its domestic package shipments are rising at a brisk pace.

Earlier this month, UPS's freight division raised its rates by an average 5.9% for noncontractual shipments in the U.S., Canada and Mexico. And in May the company outlined plans to use a higher percentage of cash to finance its $6.8 billion purchase of Dutch package shipper TNT Express N.V. (TNTE.AE, TNTEY) and received authorization to buy back an additional $5 billion in stock.

UPS reported earnings of $1.12 billion, or $1.15 a share, up from $1.09 billion, or $1.09 a share, a year earlier. Revenue edged up 1.2% to $13.35 billion.

Analysts surveyed by Thomson Reuters expected a profit of $1.17 on revenue of $13.7 billion.

Operating margin widenened slightly to 13.4% from 13.2%.

U.S. package revenue increased 4.1% as the unit's operating profit climbed 14%. Daily volume rose 4%. In the international package business, revenue slipped 4.1% under pressure from currency fluctuations, weaker global economies and reductions in exports from Asia, while operating profit slid 10%. Average volume per day was flat at 2.3 million.

Supply chain and freight revenue fell 1.7% to $2.28 billion.

Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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