UPS rebounds to beat forecasts despite rough holiday season

UPS, the parcel delivery service, recovered from a difficult last quarter of 2014 to report first-quarter net income up 12.6 per cent on the same period last year, to $1.03bn.

Diluted earnings per share - up 14 per cent to $1.12 - exceeded analysts' $1.09 consensus forecast for the quarter. Operating profit in the core US domestic package business increased 11 per cent to $1bn on revenue up 3.8 per cent to $8.8bn. Package volume rose 2.4 per cent and revenue per package grew 1.3 per cent.

David Abney, chief executive, said the figures had been "favourably impacted" by the company's continued investments and revenue management initiatives.

The company reaffirmed its guidance for full-year earnings of between $5.05 and $5.30 per share.

"These actions delivered high value to our customers and shareowners," Mr Abney said of the investments and revenue management initiatives. "We are on track to achieve the company's long-term financial targets."

The company's shares rose 1.41 per cent in premarket trading in New York, to $99.00.

The first-quarter figures come in the wake of a second successive year for UPS of problems related to the pre-Christmas delivery rush. Having underestimated likely volumes before Christmas 2013, the company overinvested last year and had expensive idle capacity.

This year's first-quarter results compare with a first quarter of 2014 when UPS, like other transport and logistics businesses, suffered heavily amid severe winter weather in North America.

In its international space, operating profit grew 13.7 per cent to $498m but revenue declined 5 per cent to $2.97bn. The revenue decline reflected the increased strength of the US dollar, the company said. Without currency movements, revenue would have increased 2.4 per cent.

In supply chain and freight, operating profit increased 3 per cent to $151m, on revenue up 1.3 per cent to $2.19bn. Freight forwarding revenue had suffered from the dollar's strength, the company said. But the "flexibility of the UPS portfolio" had meant it was able to help customers during the quarter circumvent severe disruption at US West Coast ports.

UPS, like FedEx, its main competitor in the US, is grappling with both challenges and opportunities as a result of the rise of ecommerce. The growing business is producing significant extra volumes. But traffic flows are growing harder to predict; much of the traffic uses lower yielding, slower services and there are high costs from delivering to individual consumers' homes, rather than in bulk to businesses.

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