UPS Earnings Beat on Growth in Exports, Ground
United Parcel Service reported quarterly earnings that topped analysts' forecasts on Thursday, helped by strong post-holiday season demand.
Following the earnings announcement, the company's shares fell slightly in trading but later rebounded to trade higher. (Click here to get the latest quotes for UPS.)
"Increased focus by traditional retailers on using their brick-and-mortar locations as distribution sites is creating more pickups at retail locations for ultimate residential delivery," Chief Financial Officer Kurt Kuehn said on a post-earnings conference call.
As cost-conscious consumers shift from air express to slower and cheaper modes of shipping, UPS's stronger North American domestic network puts it in a better position than rival FedEx, which focuses more international air shipments.
FedEx cut its full-year forecast in March after a lower-than-expected quarterly profit and said it would step-up restructuring efforts and cut capacity in Asia.
UPS also said it expected economic uncertainty to continue and that a weak global freight market would offset gains from post-holiday U.S. sales in January. However, the company reaffirmed its full-year earnings forecast of $4.80 to $5.06 per share.
Net income rose to $1.04 billion, or $1.08 per share, in the quarter ended March 31, from $970 million, or $1 per share, a year earlier.
Excluding items, UPS earned $1.04 per share.
Revenue increased to $13.43 billion from $13.14 billion a year ago.
Analysts had expected the company to report earnings excluding items of $1.01 a share on $13.46 billion in revenue, according to a consensus estimate from Thomson Reuters.
Global export volume increased 3.8 percent, driven by an 8 percent increase in shipments to Asia.
Daily package volume in the U.S. grew 4.4 percent, led by UPS Ground, which delivered 531,000 more packages per day.
UPS, like No. 2 package delivery company FedEx, is viewed as an economic bellwether because of the volume of goods it handles.
UPS on Thursday said it would buy Hungarian pharmaceutical logistics company, CEMELOG Zrt, to strengthen its healthcare reach in Europe. It did not disclose the terms of the deal.
"The emerging markets' business-to-consumer (offering) and industry specific solutions like healthcare have enormous potential and UPS continues to invest in them," Chief Executive Scott Davis said.
"We expect similar deals to come to offset the unsuccessful plan to buy TNT," S&P Capital IQ analyst Jim Corridore said, raising his price target on the stock to $100 from $94.
UPS dropped its $7 billion bid for Dutch delivery firm TNT Express in January after European regulators said they would veto the deal on antitrust concerns.
UPS said it plans to buy back about $4 billion worth of stock this year, about 5 percent of its current market capitalization of nearly $80 billion. It repurchased shares for $1 billion in the first quarter.
The company's shares have gained more than 5 percent in the last 12 months but have underperformed the wider S&P 500 index, which has risen 15 percent.