UPS tops 3Q profit forecasts despite dip in revenue

DALLAS (AP) – United Parcel Service, Inc. (UPS) predicts that holidayseason deliveries will rise at least 10 percent from a year ago, 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.

UPS 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.

CEO David Abney said the company has seen "some softness'' in the US economy, especially in manufacturing. Deliveries to consumers grew but shipments from one business to another faded in the third quarter, he said.

Falling fuel prices were a doubleedged 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. International profit rose 10 percent.

Profit rose 3.5 percent, and UPS earned $1.39 per share, topping expectations. Analysts surveyed by FactSet and Zacks Investment Research had forecast $1.37 per share.

Revenue, however, dipped 0.4 percent to $14.24 billion, and missed analysts' targets. Analysts surveyed by FactSet expected $14.41 billion, while the Zacks survey forecast $14.35 billion.

Executives said they expect 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, although they will start a little later when they are really needed, Chief Financial Officer Richard Peretz said in an interview.

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.