UPS sees upturn as more items move

People continue to buy more products online as the U.S. economy improves, UPS executives said, even as customers are opting to move packages more slowly in Europe and shipping from Asia remains sluggish.

“We’re seeing a steady if unexciting recovery,” UPS Chief Financial Officer Kurt Kuehn said of the U.S. “Consumer spending is up a bit.”

UPS made $970 million in the first quarter of 2012, a 6 percent increase over the first quarter of 2011. The company’s stock fell $1.40 a share Thursday— or 1.76 percent — to close at $78.25 because analysts expected the company to make more.

Domestic shipping, largely driven by online sales, was up 4.5 percent for the first three months of the year, higher than Sandy Springs-based UPS expected, Kuehn said.

“More and more, it’s a way of life for people,” Kuehn said of online shopping.

UPS is seeing more gains in lightweight shipping, including a program that delivers packages to the U.S. Post Office for the last leg of delivery, saving shippers money. But in- creased lightweight shipping on next-day air means UPS is making less money on those packages than if it were shipping larger, heavier items.

Still, the amount the company makes per package overall has increased to 2008 levels, and Kuehn said he expects those numbers to continue to rise. Kevin Sterling, a senior vice president for BB&T Capital Markets, said he expects more shipping done via ground service — where margins are higher, even if the cost per package is less — because of the speed of UPS’ ground delivery network.

Kuehn also noted that UPS’ letter volume was also back up to 2008 levels, driven primarily by the shipping of mortgage refinancing documents. Sterling said that increase could be an early sign of a pickup in the housing market.

Other parts of the world did less well than the U.S. Europe is a “question mark,” Kuehn said, and while shipping within Asia is strong, exports to the U.S. and Europe have been weaker.

In Europe, Kuehn said, customers are increasingly trading down, choosing a less pricy afternoon delivery over a more expensive morning one, for example.