International boosts UPS earnings
Net income at United Parcel Service jumped 28% in the third quarter to $739 million, up from $578 million a year ago. Revenue was up 7.2% to $8.3 billion, compared with $7.8 billion.
The Atlanta-based logistics provider attributed the gains to a strengthening U.S. package business and record performances by its international and non-package businesses, as well as the sale of its aviation technology business and a favorable tax ruling.
The comparison with the year-ago quarter is somewhat distorted by lower U.S. package volumes the company had in the third quarter of 2002 due to the threat of a Teamsters strike. The union and the company agreed to new contract in mid-July of 2002, two weeks before the strike deadline.
International export package volume climbed 8.1 percent as that sector posted an operating profit of $176 million, making it the most profitable quarter for international business in UPS history. International operating profit in last year’s third quarter was $65 million.
International package revenue was up 15.7 percent to $1.4 billion.
In a sign that the weaker dollar may be bolstering U.S. exports, UPS said its export volume from the U.S. rose 6.5 percent. That was far surpassed, however, by the 14 percent jump in exports from the Asia-Pacific region.
Non-package revenue increased 6.2 percent to $723 million, while operating profit for that unit jumped 92 percent to $146 million, including the $24 million gain from the sale of UPS Aviation Technologies.
The non-package businesses benefited from revenue growth, new customer contracts, and the successful integration of acquisitions into its UPS Supply Chain Solutions unit. The supply-chain operation accounts for three-quarters of the company’s non-package revenue.
“The strategy of expanding our distribution and supply chain capabilities will feed the success of all parts of our business going forward,” said Scott Davis, chief financial officer.
“In light of our momentum and the firming U.S. economy, we believe UPS is going to have a strong fourth quarter,” Davis said. “We expect to see additional improvement in our U.S. domestic segment with volume growth of 3 percent to 4 percent.” He also predicted continued solid growth in the international and non-package sectors.
The U.S. package business, which accounts for 75 percent of total revenue, enjoyed a 5.6 percent gain in sales to $6.2 billion, up from $5.9 billion a year ago. Next-day air traffic rose 10.2 percent in volume, while the ground business, which is facing increased competition from FedEx Corp. and DHL Worldwide, was up 2 percent. Total domestic package volume rose 3.2 percent to 374,000 packages a day.
Operating profit for the domestic business was up 2 percent to $825 million. Ed Wolfe, an analyst with Bear Stearns, called that figure disappointing, especially in comparison with the depressed third quarter in 2002.
Davis said UPS expects fourth-quarter earnings to range from 65 cents to 70 cents a share, compared to 59 cents in the same period last year. The company expects to achieve its targeted earnings growth of 10 percent to 15 percent for the full year, he added.
