UPS Delivers on Growing Demand, Improved Pricing

United Parcel Service Inc. posted a stronger-than-expected second quarter, paced by domestic business that squeezed more profit from growing volume.

Revenue in UPS's domestic segment climbed 8.1% to $9.75 billion, as the company benefited from growing demand for e-commerce deliveries, while operating profit rose 13% to $1.4 billion. Revenue per piece in the segment rose 3%, as the company benefited from prices increases and higher fuel surcharges.

But shares in UPS, down 2% over the past 12 months, fell 2.8% to $109.19 in premarket trading Thursday.

Investors are eager for indications that the Atlanta-based company is making more money from delivering customers' online orders and if there is space for raising prices.

UPS last month said it would charge more for packages delivered during the busiest weeks before Christmas, and before that it said it plans to ask shippers to help pay for the extra investments to expand its holiday capacity, even if orders fall short.

The e-commerce boom is requiring delivery companies like UPS to make additional investments to meet demands. The company already said it plans to raise its capital-expenditure budget for the next few years as it automates more facilities and orders larger cargo jets.

The company said that in its latest quarter, average daily package volume rose 5%. Revenue rose 7.6% to $15.75 billion, above the expectations of analysts surveyed by Thomson Reuters, who expected $15.47 billion. Average revenue per piece rose 1.7% to $10.75.

Total operating expenses in the quarter jumped 7.5% as shipping has generally become more expensive, in part because of the added costs of delivering e-commerce orders to homes. The company posted, however, a 8.7% rise in overall operating profit.

In total, UPS earned a profit of $1.38 billion, up 9% from a year ago. On a per-share basis, the company said it earned $1.58, up from $1.43. Analysts polled by Thomson Reuters had expected $1.47 a share.

The company did warn, however, that it expects currency headwinds and costs linked to strategic initiatives to pressure results in the second half of the year. UPS reaffirmed its annual guidance for adjusted earnings on a per-share basis to a range between $5.80 and $6.10.

Write to Ezequiel Minaya at ezequiel.minaya@wsj.com

(END) Dow Jones Newswires

July 27, 2017 09:01 ET (13:01 GMT)