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US e-commerce deliveries lift UPS quarterly profit

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United Parcel Service (UPS) on Thursday reported a higher-than-expected quarterly net profit, citing a jump in e-commerce deliveries in its US domestic package service and confirmed its forecast for 2017.

[DETROIT] United Parcel Service (UPS) on Thursday reported a higher-than-expected quarterly net profit, citing a jump in e-commerce deliveries in its US domestic package service and confirmed its forecast for 2017.

The world's largest package delivery company said revenue at its core US domestic package service rose 8 per cent during the quarter to US$9.7 billion. Revenue per package in the domestic unit was up three per cent versus the second quarter of 2016, reflecting the fact that they raised prices.

Like its main rival FedEx Corp, UPS has experienced a boom in e-commerce packages over the last decade. But the boom has come at a price, as both companies have had to invest heavily in their networks to handle the extra business.

The Atlanta-based company posted second-quarter net income of US$1.4 billion or US$1.58 per share, up nearly 8 per cent from US$1.3 billion or US$1.43 per share a year earlier. Analysts had expected earnings per share of US$1.47, according to Thomson Reuters.

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UPS said higher fuel surcharges and workers' compensation contributed 10 US cents per share to earnings in the quarter.

Richard Peretz, UPS's chief financial officer, said in a statement the results were in line with the company's expectations.

"Looking at the second half of the year, our core business performance will continue to produce solid results," Mr Peretz said.

The company said it expects full-year earnings per share in a range from US$5.80 to US$6.10.

Analysts expect earnings per share for the year of US$5.95.

In light premarket trading, UPS shares were up 1.5 per cent at US$114.

The company said revenue in its international segment was up 2.8 per cent but operating profit fell nearly 5 per cent, hurt by the strength of the US dollar.

UPS also said revenue in the supply chain and freight segment was up 12 per cent, reflecting improving market conditions.

The company said it was investing more in its network to handle the additional volume associated with e-commerce.

Like FedEx, UPS has struggled with the expense of "the last mile" associated with delivering to residential addresses.

The cost per package to businesses is typically lower because they receive more deliveries.

UPS said year-to-date capital expenditures to support investment strategies were US$2 billion, and operating costs for facility construction and Saturday operations to handle growing e-commerce business increased costs by about US$35 million.

REUTERS

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