UPS Growth Story Lives On
 

UPS Growth Story Lives On
By Ross Snel
TheStreet.com Staff Reporter
10/20/2005 12:03 PM EDT
URL: http://www.thestreet.com/markets/rosssnel/10248494.html

Updated from 9:43 a.m. EDT

UPS (UPS:NYSE) reported earnings growth that was in line with Wall Street's forecasts as worldwide package volume continued to rise, and the company offered bullish 2006 guidance.

The world's largest parcel shipper said it earned $953 million, or 86 cents a share, matching the average third-quarter analyst estimate from Thomson First Call. A year before, UPS earned $890 million, or 78 cents a share.

Revenue for the quarter was $10.55 billion, up 17.9% from $8.95 billion a year earlier and slightly higher than the $10.39 billion analyst consensus.

Shares of UPS were trading up $1.03, or 1.4%, at $71.86. Shares of rival FedEx (FDX:NYSE) , which last month reported a strong August quarter, rose 84 cents, or 1%, to $89.67.

"This has been a great quarter of growth for UPS," said Mike Eskew, the company's CEO. "We have tremendous momentum right now in the U.S. and around the world, and we see it continuing."

The Atlanta-based company said average daily package volume in the U.S. increased 4%, outpacing broader economic growth. The increase was driven by a 6.1% jump in express air packages, but it also benefited from a 3.6% rise in the average daily volume of packages shipped on the ground.

For the full year, the company expects to meet its previously stated goal of an 18% to 20% increase in diluted earnings per share compared with the adjusted $2.90 reported in 2004. That implies an EPS range of $3.42 to $3.48. On average, analysts expect full-year earnings of $3.47.

Because business at UPS and FedEx reflects broader economic trends, their forecasts on the economy are closely watched.

During a conference call, UPS executives predicted a steady domestic economy in 2006, with growth slightly below the expected rate for all of this year. Trends suggest growth in the low-3% range, executives added.

For its own business, UPS expects an 11% to 16% increase in diluted earnings per share from this year's. That points to a profit of $3.80 to $4.04, vs. the existing analyst consensus of $3.87.

The next-year's guidance is "encouraging" and indicates UPS's growth and leverage opportunities remain abundant, despite already strong 2005 earnings growth, says Jon Langenfeld, an analyst at Robert W. Baird & Co.