SEATTLE/DETROIT (Reuters) - United Parcel Service Inc on Thursday reported a higher-than-expected quarterly net profit due to rising ecommerce deliveries but investors worried about the company’s performance in the back-half of the year and shares fell 4 percent.
The world’s largest package delivery company said quarterly revenue at its core U.S. domestic package service rose 8 percent to $9.7 billion. Revenue per package in the domestic unit was up 3 percent, reflecting raised prices.
Both UPS and its main rival, FedEx Corp, have spent billions of dollars in upgrading their networks to handle rapidly rising e-commerce package volumes, particularly in the weeks leading up to Christmas, leaving investors frustrated over the expense.
“As far as peak of this year, we have additional capacity that’s opening in several different spots throughout the country,” Chief Executive Officer David Abney told Reuters on Thursday. “We have healthy volume growth, so we are planning for that.”
Often seen as a bellwether of U.S. economic activity, the Atlanta-based company posted second-quarter net income of $1.4 billion or $1.58 per share, up nearly 8 percent from $1.3 billion or $1.43 per share a year earlier. Analysts had expected earnings per share of $1.47, according to Thomson Reuters I/B/E/S.
Higher fuel surcharges and workers’ compensation contributed 10 cents per share to earnings in the quarter.
Despite the beat, UPS kept its forecast unchanged.
The company expects full-year earnings per share in a range from $5.80 to $6.10. Analysts expect earnings per share for the year of $5.95.
“The back half of the year appears a little weaker than investors had expected and that’s the overhang on the stock,” said Ben Hartford, analyst with Robert W. Baird & Co in Milwaukee. “Investors are wrestling with the fact that they did not change the full-year guidance.”
The company said revenue in its international segment was up 2.8 percent because of export growth in Asia and Europe but operating profit fell nearly 5 percent.
FedEx said it was experiencing a disruption in services in its Netherlands-based TNT Express unit following a cyber attack in June. Earlier this month, FedEx said the attack would hurt its full-year results.
UPS executives told analysts the company has seen an uptick following the attack.
“Straight up, yes, we are seeing more business recently in Europe,” UPS Chief Information Officer Juan Perez said.
Revenue in the supply chain and freight segment was up 12 percent, reflecting improving market conditions.
Reporting By Eric M. Johnson and Nick Carey; Editing by Nick Zieminski
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