UPS raises 2011 view despite higher economic risk - East Valley Tribune: Business

UPS raises 2011 view despite higher economic risk

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Posted: Tuesday, April 26, 2011 5:08 am | Updated: 9:22 am, Tue Apr 26, 2011.

(AP) — UPS expects the pace of the economic recovery to moderate because of risks like high oil prices, but it remains confident it can grow earnings significantly from a year ago.

The world's largest package delivery company on Tuesday raised its full-year earnings forecast after first-quarter net income rose 66 percent as customers paid more to move packages faster.

United Parcel Service Inc. now expects to earn $4.15 to $4.40 per share this year, implying growth of 17 to 24 percent from 2010. Its previous estimate was $4.12 to $4.35 per share.

Besides higher fuel prices, unrest in the Middle East and uncertainties surrounding nuclear fears in Japan are among the major risks to economic growth this year, Chief Financial Officer Kurt Kuehn said in an interview with The Associated Press. But UPS expects continued revenue growth across the world combined with higher prices and fuel surcharges to drive earnings.

"The global economic outlook has become a little cloudier than it was three months ago," Kuehn said. "However, we still expect 2011 to be a great year."

In the first three months of 2011, the Atlanta company earned $885 million, or 88 cents per share, up 66 percent from a year earlier when it earned $533 million, or 53 cents per share.

Revenue jumped 7 percent to $12.58 billion.

FactSet says analysts expected a profit of 84 cents per share on sales $12.71 billion.

UPS' freight segment results grew the fastest in the first three months of the year, with adjusted operating profit up 44 percent. The freight segments at both UPS and rial FedEx were struggling last year as the trucking industry had too many trucks competing for too little freight. In the U.S. domestic package unit, which was recently reorganized, adjusted operating profit jumped 29 percent.

In the U.S., UPS said more customers opted for faster service as its premium product growth outpaced ground service. Customers had been favoring cheaper, slower options to save money in the recession. Revenue per package rose 5 percent, driven by higher prices and fuel surcharges.

Even if oil prices continue to rise, Kuehn said he doesn't expect customers to trade down as much as they did in 2008. UPS has lowered fuel surcharges for air shipments, which narrowed the price gap between speedier and slower shipping options. And more businesses rely on faster shipping options now than they did three years ago, because they're keeping inventories lean — a measure of caution as the global economy recovers.

In morning trading, UPS shares rose 98 cents to $74.62. The stock's year high is $77.

© 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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