UPS 1Q profit up, but international business slows

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By SAMANTHA BOMKAMP, Associated Press

ATLANTA (AP) — UPS said Thursday that its first-quarter profit rose 6 percent, but the result came in below Wall Street's expectations as Asian exports and other international shipments slowed.

United Parcel Service Inc., the world's largest package company, said net income rose to $970 million, or $1 per share, from $915 million, or 91 cents per share.

Revenue rose 4.4 percent to $13.14 billion.

Analysts' expected net income of $1.02 per share and revenue of $13.3 billion, according to FactSet.

Much of UPS' profit growth came from its core U.S. business, where revenue was up 6.1 percent on higher volume and prices. But that was offset by a shift toward lighter packages and slower shipping methods. UPS is handling more e-commerce packages from online businesses directly to consumers, which tend to be lighter and cheaper to ship.

UPS, based in Atlanta, also said that online sales drove some of its speedy shipping options, including next day air. Ground volume rose 4 percent on demand for lightweight, less expensive shipments.

International revenue was up just 2.3 percent to $2.97 billion, and revenue per package fell. Asian exports have slowed as China's economy cools. And some European countries are sliding into recession. The international business, which had been racking up double-digit quarterly sales gains, has been slowing since last summer.

UPS said part of the reason that shipments from Asia to the U.S. are down is that some businesses are locating factories in Mexico or other countries closer to home, to keep a tighter handle on inventory. Still, Chief Financial Officer Kurt Kuehn said in an interview that volumes within Asia and between countries in Europe were surprisingly strong. Some strength in Europe bodes well for the company, which in March offered $6.77 billion to buy Dutch rival TNT Express, by far the biggest deal ever for UPS.

Revenue in UPS' smallest segment, the supply chain and freight unit, rose 1.3 percent.

The company stuck with its forecast for the year. It expects to earn between $4.75 and $5 per share.

UPS and its smaller rival FedEx Corp. tend to be indicators of broader economic health because they move millions of packages for businesses and consumers every day.

UPS shares fell $1.40, or 1.8 percent, to close at $78.25 Thursday. FedEx shares dropped 67 cents to $87.55.

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