UPDATE 2-UPS goes back to business in $20 bln automation push

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Sept 13 (Reuters) - United Parcel Service Inc is bolstering services to boost shipments between businesses as part of a $20 billion push to automate its network and offset lower-profit home deliveries from Amazon.com and other online retailers.

The world's biggest package delivery firm's embrace of expensive "last-mile" home shipments of everything from clothes to car tires has squeezed margins as it competes with FedEx Corp , which takes fewer of those pricey deliveries.

UPS shares fell 1.7 percent to $121.21 in midday trade after executives on Thursday boosted long-term earnings targets but stopped short of saying they would take fewer home deliveries.

UPS is still more profitable than FedEx, but "FedEx may be better at saying 'no' to low-profit volume," Morningstar analyst Keith Schoonmaker said.

Atlanta-based UPS, now in the early innings of its largest capital spending campaign since the 1980s, is rebalancing its mix of customers and package volume as part of broad plan to boost earnings and efficiency, Chief Executive Officer David Abney said at an investor conference in New York on Thursday.

About half of UPS package processing facilities are automated and the company has earmarked most of the spending from its three-year capital investment project to bringing the company in-line with FedEx, which is wrapping up a roughly $10 billion investment in its mostly automated network.

UPS on Thursday said its restructuring plan will add $1.00 to $1.20 to its adjusted earnings per share by 2022. That includes up to $1 billion in savings from more efficient sorting facilities and purchasing along with a voluntary retirement program.

50/50 SPLIT

Margins in UPS' domestic unit that contributes more than half of company profits fell to 12.1 percent in 2017 from 13.8 percent in 2012 as residential deliveries displaced more profitable business deliveries, which now account for about half of total volume.

Analysts said results from the latest quarter signaled that the company may be learning to say "no" to some shipments to protect margins. Average revenue per piece increased 3.6 percent in the second quarter, the biggest improvement in the last few years, while volume growth fell 2.6 percent.

UPS is already the largest shipper of business-to-business (B2B) e-commerce packages. It is adding and enhancing services for that nearly $1 trillion market, which is almost twice the size of the faster-growing business-to-consumer (B2C) segment dominated by UPS client and budding shipping rival Amazon.

UPS on Thursday said it will support business customers with a custom version of UPS My Choice that helps users like hospitals track deliveries and route them to the right location within their sprawling facilities - reducing lost packages, costs and headaches.

That will augment initiatives such as Ware2Go, which is designed to spur more UPS B2B e-commerce deliveries by making it easier and cheaper for small and medium U.S. businesses to shift operations online. It matches businesses with warehouse space and fulfillment providers who prepare and hand off packages for UPS to deliver to distributors and other businesses.

(Reporting by Sanjana Shivdas in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Shounak Dasgupta and Meredith Mazzilli)