UPS tops 3Q profit forecasts despite dip in revenue

DALLAS: UPS predicts that holiday-season deliveries will rise at least 10 percent, to more than 630 million packages between Thanksgiving and New Year's Eve.

The company expects its busiest day to be Dec. 22, the Tuesday before Christmas Day, when it expects to deliver more than 36 million packages double the normal day's load.

On Monday, rival FedEx Corp. predicted that shipments will rise 12.4 percent between Thanksgiving and Christmas Eve. Both companies are being helped by the continuing growth in online shopping.

United Parcel Service Inc. gave its holiday forecast as it reported a slightly higher profit of $1.26 billion but a surprising drop in revenue during the third quarter.

UPS shares fell more than 2 percent in morning trading.

Falling fuel prices were a double-edged sword for the Atlanta-based package-delivery giant. Cheaper fuel reduced expenses but also took away revenue from fuel surcharges paid by customers, contributing to a 1.6 percent drop in operating profit in its US business.

The quarter was helped by a 10 percent increase in international profit.

The results were mixed overall profit rose 3.5 percent and beat Wall Street expectations, but revenue fell 0.4 percent and missed analysts' forecasts.

UPS said it earned $1.39 per share. The average estimate of 25 analysts surveyed by FactSet and 12 analysts surveyed by Zacks Investment Research was for $1.37 per share.

Revenue, however, dipped to $14.24 billion. Analysts surveyed by FactSet expected $14.41 billion, while Zacks survey forecast $14.35 billion. Shipments rose 1.9 percent to 1.1 billion packages.

Chief financial officer Richard Peretz said the company expected full-year earnings to be at the higher end of its forecast of $5.05 to $5.30 per share, which would indicate an increase of between 6 percent and 12 percent over 2014.

The company is preparing for the peak holiday season, and expects to hire up to 95,000 temporary workers to help handle the load. Planning for the holiday rush can be difficult for the delivery companies. UPS expects that residential deliveries, which are more costly, will be a higher percentage of its business than during the rest of the year. Last year, heavy spending during the season led to a drop in UPS' quarterly profit.

Earlier this month, UPS announced a series of price increases that will take effect during the rest of the year, including higher surcharges for heavy or oversized packages.

In morning trading Tuesday, UPS shares quickly dropped $2.65 or 2.5 percent, to $103.53. They began the day down 4.5 percent since the beginning of the year, while the Standard & Poor's 500 index was up nearly 1 percent.