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UPS Q4 Profit Falls On Accounting Change, To Buyback $2.7 Bln In Shares


United Parcel Service Inc. (UPS) reported Tuesday a 29.3 percent decline in fourth-quarter profit, directly reflecting pension accounting charges. Adjusted earnings climbed from last year and topped Street projections. Quarterly revenues missed estimates, even though it increased on higher volumes. Looking ahead, the Package delivery giant expects higher earnings amid expectations for mixed global economic growth. The company also said it anticipates $2.7 billion in share repurchases for the year.

Fourth-quarter net income fell to $725 million from $1.03 billion last year. Earnings per share declined 27.5 percent to $0.74 from $1.02 in 2010.

The company said a newly applied change in pension accounting to a mark-to-market methodology resulted in charges of $527 million, compared to last year's $75 million.

Adjusted net income, which excluded items, grew to $1.25 billion or $1.28 per share from last year's $1.07 billion or $1.06 per share, inclusive of change in pension accounting.

On average, 25 analysts polled by Thomson Reuters expected earnings per share of $1.26 for the quarter. Analysts' estimates typically exclude one-time items.

The company noted that the change in pension accounting improved fourth-quarter results by $0.03, while reduced prior year's results by $0.02.

Kurt Kuehn, UPS's chief financial officer, said, "UPS achieved record earnings per share in a volatile global operating environment where trends varied by region. This was made possible by our balanced world-wide presence, broad portfolio of solutions and the best people in the business."

Total revenues for the quarter increased 5.6 percent to $14.17 billion from $13.42 billion in 2010, while analysts estimated revenues of $14.45 billion.

Operating margin declined to 8.4 percent from last year's 12.5 percent, while adjusted margin grew to 14.3 percent from 12.9 percent in 2010.

During the quarter, UPS delivered 1.13 billion packages, up 3.6 percent, and average volume per day was 18.3 million, higher than 17.7 million last year.

UPS noted that it delivered 480 million packages during the peak shipping season, driven by e-commerce.

Segment-wise, U.S. Domestic Package revenues climbed 7.3 percent due to more than 7 percent volume surge during peak season. Robust internet shopping activity resulted in a 3.8 percent increase in average daily volume.

International revenue rose 3.5 percent, with export volume improving 4.5 percent, surpassing 1 million pieces on an average daily basis for the first time in UPS history. This was driven by European exports and strong intra-regional growth in Asia, the company said.

Supply Chain & Freight revenues rose 2.1 percent.

UPS chairman and CEO Scott Davis commented that the quarter was a 'testament to the power of UPS's global model and the company's ability to operate efficiently in evolving markets.'

Looking ahead for 2012, the company said it expects earnings per share to be within a range of $4.75 to $5.00, an increase of 9 percent to 15 percent over adjusted 2011 results. Analysts expect earnings of $4.77 per share.

Kuehn said the company's expectations for the year are for mixed economic growth around the world, with modest improvement in the U.S. However, UPS projects another strong year of earnings.'

UPS shares are currently trading at $76.15 in pre-market activity, up $0.76 or 1 percent.

by RTTNews Staff Writer

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