DALLAS -- United Parcel Service Inc. said Thursday that its third-quarter profit inched higher on growing revenue in the U.S. and a more profitable international delivery business.
For the third quarter, UPS said it earned $1.27 billion, up 1 percent from a year earlier. Revenue rose 4.9 percent to $14.93 billion, beating analysts' forecast of $14.72, according to FactSet, but costs rose at a 5.2 percent clip.
The earnings of $1.44 per share matched the forecast of 20 analysts surveyed by FactSet and were a penny better than the average estimate of 11 analysts surveyed by Zacks Investment Research.
UPS stuck with its earlier forecast of full-year earnings between $5.70 and $5.90 per share.
Revenue in the U.S. delivery business rose nearly 5 percent as UPS continued to benefit from the growth in online shopping. Revenue per package, however, grew only 1 percent, and operating profit was about flat.
Operating profit was smaller but grew 14 percent in the company's international business, as an increase in packages offset lower revenue per piece.
UPS shares fell 53 cents to close Thursday at $108.08. Its shares are up more than 4 percent in the past year.
The package-delivery company is heading into biggest test of the year, the Christmas season. UPS expects to deliver more than 700 million packages between Thanksgiving and New Year's Eve, about 100 million more than last year.
The third-quarter profit was roughly in line with Wall Street expectations but revenue beat the forecasts.
Chief Executive Officer David Abney said even with only moderate economic growth UPS has "good positive momentum ... and we expect to have a real good fourth quarter." The effect of the economy on UPS continues to be mixed, he said.
"Consumer [spending] is still going well, and e-commerce especially," Abney said. "The industrial side is not as good as we would like."
UPS plans to add about 95,000 seasonal workers -- the same as last year -- to handle the crush of orders filled by online shoppers. The company believes it can hold Christmas season hiring flat by using more automation to scan and sort packages more quickly and by opening temporary sorting hubs.
The company is wary about adding too many temporary workers. After a disastrous 2013 Christmas season when many packages were delivered late, the company beefed up staffing aggressively.
"They hired way too many part-time associates and then they didn't have the volume to justify that," said Logan Purk, an analyst for Edward Jones. "It was so inefficient that [profit] margins took a big hit."
Purk said he would be watching closely for signs of such inefficiency this season but was optimistic because UPS appeared to get things right last year.
CFRA Research analyst Jim Corridore said he upgraded UPS shares from "buy" to "strong buy" on the expectation that it will benefit from online sales and record Christmas volumes.
UPS and Boeing Co. announced an agreement Thursday for UPS to buy at least 14 747 jumbo-jet freighters.
The deal for 747-8 aircraft, valued at $5.3 billion based on list prices and fueled by UPS's international expansion, may provide the first signs of an air-cargo recovery that would renew demand for the iconic hump-backed plane dubbed the "Queen of the Skies."
UPS will deploy the front-loading cargo planes on international routes while shifting some earlier-model 747s to domestic flying, the Atlanta-based courier said Thursday. The jets, which will be delivered over a three-year period starting in 2017, will begin a "cascade" of aircraft-route reassignments that will add significant capacity to the company's busiest lanes.
Information for this article was contributed by Julie Johnsson and Michael Sasso of Bloomberg News.
Business on 10/28/2016