By Angela Chen
United Parcel Service Inc. said Tuesday that first-quarter
earnings rose 14%, boosted by new pricing initiatives and strong
growth in its domestic segment.
Earnings beat expectations, though revenue fell short because of
the stronger dollar and lower fuel surcharges.
Chief Executive David Abney said the company is now "on track"
to achieve its long-term financial targets. For the full year, UPS
reaffirmed its guidance for per-share earnings between $5.05 and
$5.30.
Separately, the company said today that Chief Financial Officer
Kurt Kuehn, 60, will be retiring on July 1. He will be succeeded by
Richard Peretz, 53, who is currently the corporate controller and
treasurer.
Last quarter, the shipping giant surprised Wall Street by
announcing that preparations to handle the holiday rush cost it
$200 million more than expected. On UPS's last quarterly earnings
call, executives said they would increase holiday rates by tacking
on peak surcharges for customers shipping to residential
addresses.
In the latest quarter, the company said that the expansion of
pricing--started Dec. 29--contributed to higher yields in the
domestic and international segments.
Shares of UPS, relatively flat over the past year, rose 0.7% in
premarket trading to $98.15.
Overall, for the first quarter, UPS posted earnings of $1.03
billion, or $1.12 a share, up from $911 million, or 98 cents a
share a year earlier.
Revenue grew 1.4% to $13.98 billion.
Analysts had expected earnings of $1.09 on revenue of $14.27
billion, according to Thomson Reuters.
Total company shipments increased 2.8% to 1.1 billion
packages.
In the domestic segment, first-quarter revenue grew 3.8% to $8.8
billion as daily package volume increased by 2.4%. The Deferred Air
program grew 12% while UPS SurePost rose 77%. However, shipment
growth rates slowed because the company said it wouldn't renew
lower-yielding contracts.
Sales in the international segment fell 5%, though they would
have improved 2.4% were it not for the negative effect of the
strong dollar. However, world-wide export yield fell 5.2% because
of lower fuel surcharges.
However, operating profit grew 14% from the year before as
export shipments grew 6.7%, led by a 9.4% increase in Europe.
In the supply and freight segments, growth in distribution and
UPS Freight boosted revenue 1.3% to $2.2 billion. The distribution
business benefited from more customers in the health-care and
retail industries, the company said, and continued congestion at
the West Coast ports created challenges.
Mr. Kuehn had been financial chief for eight years, and at the
company for 38 years. He was formerly the senior vice president of
world-wide sales, and he also helped lead UPS' initial public
offering in 1999.
Mr. Peretz has also worked as international chief financial
officer and corporate finance vice president. "Richard brings to
the CFO position deep functional experience in corporate and
international leadership assignments," Mr. Abney said.
Write to Angela Chen at angela.chen@dowjones.com
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