UPS reports 37% growth in 1st quarter earnings

UPS today pre-announced a 37% increase in adjusted diluted earnings per share for the first quarter of 2010. The results were powered by a significant acceleration in the international package and supply chain businesses and improved operating margins across all three segments.

Adjusted first quarter earnings totaled $0.71 per diluted share compared to an adjusted $0.52 in the prior-year quarter. On a reported basis, diluted earnings per share were $0.53 compared to $0.40 for the prior-year period, an improvement of 33%.

Consolidated revenue for the period grew 7%, driven by increases of 18% in International Package and 14% in Supply Chain and Freight. International daily volumes grew significantly with export up more than 9% and non-U.S. domestic up over 24%. U.S. Domestic daily volume increased less than 1%, the first year-over-year growth in more than two years.

"We expected the first quarter to be the most challenging of 2010 as the economic recovery gathered steam through the year," said Kurt Kuehn, UPS's chief financial officer. "As it turned out, revenue was stronger than we expected due to international volume gains, increased yields in the U.S. and growth in Forwarding and Logistics. Also, the operating leverage in our streamlined network provided higher margins than anticipated."

As a result of the strong earnings for the first quarter and an improved outlook for the remainder of the year, UPS has increased its expectations for full-year adjusted diluted earnings to a range of $3.05 to $3.30 per share, a significant increase over the $2.70 to $3.05 provided in February.

In the first quarter, UPS realized charges on two previously announced events. First, UPS recorded a pre-tax $98 million restructuring charge related to the reorganization of the U.S. package segment and second, a pre-tax $38 million loss on the sale of a specialized transportation business in its supply chain unit in Germany. Additionally, the company recorded a $76 million non-cash charge to income tax expense resulting from a change in the tax filing status of a German subsidiary. These charges reduced net income by $175 million and diluted earnings per share by $0.18.

UPS took an impairment charge, in the first quarter of 2009, on its DC-8 fleet resulting in a non-cash expense of $181 million, which reduced net income by $116 million, or $0.12 per share.

The company will provide additional details of its performance during its first quarter earnings call on April 27.