Bloomberg News

UPS Falls as Decline in Asia-to-U.S. Shipments Curbs Growth

October 25, 2011

(Updates share prices in third paragraph.)

Oct. 25 (Bloomberg) -- United Parcel Service Inc., whose deliveries make it a proxy for the economy, fell in New York trading after declining shipments from Asia to the U.S. curbed growth in the company’s international business.

UPS cut its airlift capacity for Asia as shipments to the U.S. decreased, the Atlanta-based company said on a conference call after announcing third-quarter earnings. International deliveries overall increased 4.6 percent, trailing the 6.2 percent gain in the previous three months.

UPS fell 2.1 percent to $69.35 at 4:15 p.m., the biggest decline this month. Profit climbed 5.1 percent to $1.04 billion, or $1.06 a share, surpassing the average estimate of $1.05 in a Bloomberg survey of 22 analysts.

“We built a network expecting a certain level of growth that did not materialize,” Chief Financial Officer Kurt Kuehn said on the call. The company reduced its air capacity near the end of the period, he said in a telephone interview.

A year earlier, UPS reported net income of $991 million, or 99 cents a share. FedEx Corp., operator of the world’s biggest cargo airline, cut its full-year forecast last month amid declining demand in the U.S. and Asia.

Kuehn said the drop in Asia-U.S. shipments probably wasn’t caused by consumers shifting purchases to the fourth quarter from the third.

“Most of it was lost growth, frankly,” Kuehn said in the interview. “There may have been some shifting, but economical activity was sluggish. The uncertainty was extremely high in the U.S.”

Fourth Quarter

Operating profit in the company’s international package segment fell 2.4 percent to $409 million. Without pressure from fuel costs and currency exchange rates, that profit “would have been up mid-single digits,” Kuehn said.

Asian exports probably will grow moderately in the fourth quarter, he said.

UPS sales rose 8 percent to $13.2 billion, topping the mean estimate of $13.1 billion from 17 analysts. Average revenue per package increased in all the company’s segments, led by a 12 percent gain for intra-country shipments outside the U.S.

UPS’s ground volumes in its U.S. domestic segment were little changed amid a slow economy, while Next Day Air shipments climbed 1.3 percent.

“We are seeing a little better firmness in October than we’d seen in the third quarter in the U.S,” Kuehn said.

The company said it repurchased more than $1.1 billion of its stock during the quarter. So far this year, UPS has bought back 31.7 million shares for about $2.2 billion.

--With assistance from James Callan in New York. Editors: James Langford, Romaine Bostick

To contact the reporter on this story: Natalie Doss in New York at ndoss@bloomberg.net.

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.


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