UPS results get a boost from higher shipping prices

A woman walks past a sign bearing the logo of United Parcel Service (UPS) at a job fair in Chicago, Illinois, October 18, 2014. REUTERS/Jim Young

(Reuters) -United Parcel Service Inc reported better-than-expected quarterly earnings and revenue on Tuesday, bolstered by strong e-commerce demand that has allowed the delivery giant to raise shipping prices and cherry-pick more profitable customers.

The Atlanta-based firm also raised its full-year adjusted operating margin outlook to about 13% from about 12.7%, a month after rival FedEx Corp cut its profit outlook on labor shortages.

“Given concerns on network efficiencies and operating performance into the quarter, we view today’s results and outlook favorably,” Wells Fargo analyst Allison Poliniak-Cusic said in a note.

Shares of UPS were up 4.5% before the opening bell. FedEx rose 1.6%.

Both UPS and FedEx are delivering record number of e-commerce packages since COVID-19 shifted shopping online, forcing them to make a beeline for a limited number of workers along with up-and-coming rival Amazon.com Inc.

While FedEx recorded a $450 million increase in costs related to staffing problems, UPS has benefited from having a unionized labor, which is among the highest paid in the industry.

UPS has also moved to beef up its delivery operations, with plans to buy Roadie, a crowd-sourced, same-day delivery company whose major clients include home improvement chain Home Depot.

Revenue from UPS’ U.S. operations, its biggest market, rose 7.4%, helping the company to post total revenue of $23.18 billion for the third quarter ended Sept. 30. Analysts on average expected revenue of $22.56 billion.

On an adjusted basis, operating profit was $2.71 per share, above the average analyst estimate of $2.55, according to Refinitiv I/B/E/S data.

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