UPS profit gains overshadowed by trade war concerns, stocks fall
United Parcel Service reported a 20 percent increase in quarterly earnings Wednesday, but stocks dropped 3 percent after saying that the US trade war with China contributed to disappointing international results.
Investors consider UPS to be a bellwether for the US economy and they took note that President Donald Trump's shift to more protectionist trade policy influenced his business.
The UPS shares fell sharply on Wednesday after the company attributed a 11.6 percent decline in international package operating earnings to unhedged currencies in emerging markets, fuel expenditures and slower economic activity due to changes in trade policy.
"Concerns about unresolved trade issues between China and the United States, as well as Brexit, continued to be a focus for our customers," said David Abney, CEO, on a conversation with analysts. "We help them with contingency planning."
Brexit refers to Britain's departure from the EU.
The rapid growth in online store has been a boon for domestic packing volume at UPS, but it has left the company scrambling to cut additional costs related to delivery of parcels to households compared to companies that generally receive bulk parcels. Operating profit was down at 6.1[ads1] per cent for the US parcel segment during the last quarter.
UPS uses millions of dollars to upgrade and expand its network to resolve competition from FedEx Corp. and Amazon.com and are in the early stages of the largest capital utilization campaign since the 1980s.
The world's largest delivery company said sales in US parcel services increased 8.1 percent in the third quarter, while revenues in its international package segment increased by 3 percent.
Net profit increased to $ 1.51 billion, or $ 1.73 per share in the third quarter ended September 30, when tax expense fell to $ 381 million.
Only the company achieved $ 1.82 per share, in line with analysts' expectations, according to Refinitive data. 19659003] Total revenue increased by 8 percent to $ 17.44 billion and lacked expected expectations of $ 17.46 billion.
The company said it now expects the free cash flow to exceed 5 billion dollars, but in its forecast for the full year adjusted earnings of $ 7.03 to $ 7.37 per share.
