UPS Reports Surprise Revenue Drop -- 2nd Update

   By Chelsey Dulaney

United Parcel Service Inc. on Tuesday reported a surprise drop in revenue, though growth in its international division helped drive profit higher.

Shares of UPS fell 3.2% to $102.75 a share in early trading. The company backed its outlook for the year.

For the quarter ended Sept. 30, UPS posted earnings of $1.26 billion, or $1.39 a share, up from $1.21 billion, or $1.32 a share, a year earlier.

Revenue ticked down to $14.24 billion from $14.29 billion a year earlier, hurt by lower fuel surcharge rates and currency impacts. Excluding currency impacts, revenue would have risen 1.8%.

Analysts had expected earnings of $1.37 a share on revenue of $14.43 billion, according to Thomson Reuters.

Total company shipments grew 1.9% to 1.1 billion packages, led by U.S. air products and European transborder shipments.

In the domestic segment, profit fell 1.6% to $1.26 billion, dragged by lower fuel-surcharge revenue. But daily shipments ticked up 0.6%, helped by growth in air products.

Profit in the international segment grew 10% to $507 million, helped by network improvements and a 1.2% increase in daily export shipments.

In the supply chain and freight segment, operating profit increased 1.9% to $219 million. The company's acquisition of Coyote Logistics, which closed during the quarter, helped offset lower forwarding revenue and a drop in less-than-truckload tonnage.

The results come as UPS heads into the holiday peak season, and the company is working to keep its expenses in check.

UPS said it expects to deliver more than 630 million packages this holiday season, an increase of more than 10% from last year. The season, which spans from Black Friday to New Year's Eve, will include an additional shipping day before Christmas.

UPS has spent about $200 million more than it expected the last two years, first as its network was swamped with unexpected packages in 2013, and then as packages spiked around Thanksgiving and Christmas last year and left the network underused in between.

UPS said it expects up to 60% of its package deliveries during the holiday season to go to residential addresses, compared with an average of 45% during the full year.

UPS has raised its fuel surcharge and its oversize-package fee, effective Nov. 2, in the latest attempt by the delivery giant to ensure what it feels is proper compensation as shipments increasingly head to residential addresses thanks to e-commerce.

Write to Chelsey Dulaney at chelsey.dulaney@wsj.com

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(END) Dow Jones Newswires

October 27, 2015 11:17 ET (15:17 GMT)

United Parcel Service (NYSE:UPS)
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