United Parcel Service (UPS) reported an 80% jump in third-quarter net income on higher revenue and margins. The world's largest package delivery company easily exceeded Wall Street estimates and raised its full-year earnings outlook.
UPS said third-quarter profit rose to $991 million, or 99 cents a share, from $549 million, or 55 cents, a year ago. On an adjusted basis, UPS earnings came to 93 cents a share, which beat analysts' average estimate by a nickel, according to data from Thomson Reuters.
Revenue for the three months ended Sept. 30 increased 9% to $12.19 billion from $11.15 billion in last year's third quarter. The top-line number was shy of analysts' forecast for revenue of $12.37 billion. U.S. domestic package revenue gained 6%, while the international business grew 11%. The company's supply chain and freight division enjoyed a 19% jump in revenue.
Average daily volume increased 5%, while adjusted operating margin expanded more than 4% After undergoing a painful domestic reorganization, UPS has been benefiting from margin-boosting cost efficiencies.
"UPS generated superior performance across all segments," Kurt Kuehn, UPS's chief financial officer, said in a statement. "Based on the projections of retailers and economists, we expect modest growth during the holiday peak season. We are raising our full-year 2010 guidance with adjusted earnings per share expected to grow more than 50% over last year."
With its largest investment spending behind it, UPS should harvest cash flow and reward investors, said Sterne Agee analyst Jeff Kauffman in a note to clients ahead of the 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," the analyst wrote.
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.