UPS Earnings Preview: Strong Profit Growth Seen

United Parcel Service (UPS), the world's largest package delivery company, is expected to report sharply higher third-quarter profit on strong revenue growth before Thursday's opening bell.

UPS is forecast to post earnings of 88 cents a share, according to data from Thomson Reuters, up from 55 cents a share in last year's third quarter. Analysts, on average, expect revenue to increase 11% to $12.37 billion from $11.15 billion in the prior-year period.

UPS easily topped Wall Street's bottom- and top-line results in the second quarter, helped by higher volumes and market-share gains, especially overseas. After undergoing a painful domestic reorganization, the company has begun to enjoy the fruits of higher margins. The combination of higher volumes and lower costs allowed UPS to raise its full-year outlook over the summer and the stock has rallied sharply ever since.

"With its largest investment spend behind it, we look for UPS to harvest cash flow and reward investors," wrote Sterne Agee analyst Jeff Kauffman in a note to clients ahead of UPS's report. "The combination of reduced capital requirements, increasing margins and a more flexible attitude about balance sheet management should result in increased dividends, share repurchases and acquisitions to augment share price."

Like chief rival FedEx (FDX), UPS's results tend to get a lot of attention because its global footprint offers insights into the health of the world economy. Last month FedEx said it's fiscal first-quarter profit more than doubled on an 18% gain in revenue.

Shares in UPS are up 20% for the year-to-date, outperforming the broader market by a wide margin. Whether the stock can maintain its torrid run depends partly on Big Brown delivering yet another beat-and-raise quarter. See the chart below.