UPS says economy 'unexciting,' but 3Q profit soars

Associated Press
In this Oct. 18, 2010 photo, United Parcel Service (UPS) driver Paul Musial sorts packages in his truck in Palo Alto, Calif. UPS is increasing its earnings forecast for the year after reporting its third-quarter earnings jumped 81 percent Thursday, Oct. 21, 2010. (AP Photo/Paul Sakuma)
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UPS Inc. said Thursday the U.S. economy is stable but "unexciting," showing more signs of life but not recovering fast enough.

Still, the world's largest package delivery company raised its full-year earnings forecast as strong demand continued for goods from Asia and U.S. businesses shipped more overseas.

Businesses are also paying more to ship packages faster — reversing a trend of "trading down" seen when the recession dug in its heels. Many consumers, though, are still choosing slower options.

The U.S. economy will "not be at the level you will be hoping for in the next couple of quarters," UPS Chief Financial Officer Kurt Kuehn said in an interview with The Associated Press. He says UPS expects moderate shipment growth this holiday season.

"We're not overly optimistic about a rapid recovery," Kuehn said. "But we feel pretty good about Asia (where) we're seeing record progress."

Asian imports, especially electronics like iPhones and iPads, have been a boon for UPS this year as U.S. growth remains slow. They helped drive the company's third-quarter earnings up 81 percent.

Higher prices also helped drive third-quarter results across all units. Rate increases along with a shift to more expensive shipping options like Next Day air are allowing UPS to make more money per package than they did a year ago.

More companies are now choosing air service instead of cheaper truck or ocean freight options because they're keeping inventories lean — a strategy that paid off for U.S. manufacturers during the recession and has continued as budgets remain tight.

United Parcel Service Inc., which is based in Atlanta, earned $991 million, or 99 cents per share, in the third quarter. On an adjusted basis, UPS earned 93 cents per share, 5 cents higher than Wall Street analysts expected. A year earlier, UPS earned $549 million, or 55 cents per share.

Revenue rose 9 percent to $12.19 billion.

The average number of packages shipped per day in the U.S. rose 3.6 percent, while revenue per package rose 4 percent. Average daily shipping volume internationally, led mostly by shipments of electronics from Asia, rose 13 percent. In Asia, volume jumped 30 percent. In China alone shipments were up 50 percent.

UPS now expects adjusted 2010 earnings to be $3.48 to $3.54 per share. The previous forecast was $3.35 to $3.45 per share. Analysts on average expect profit of $3.45 per share.

UPS will hire 50,000 temporary employees to help with the seasonal holiday rush this year — about the same as in 2009.

UPS also plans to reinstate the 401(k) match for employees next year. It was halted during the recession.

The company's shares rose a penny to close Thursday at $69.50.

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