UPS second-quarter profit tops estimates; sees sluggish U.S. economy

Tue Jul 28, 2015 10:34am EDT
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By Nick Carey

(Reuters) - Package delivery company UPS (UPS.N: Quote) on Tuesday reported a better-than-expected second-quarter profit on improved margins, and said U.S. economic growth was being hampered by a strong dollar and an expected interest rate hike.

Shares in Atlanta-based United Parcel Service Inc rose more than 2 percent.

"The continued strength of the U.S. dollar and I think this impending rate hike by the Fed appears to be holding back some U.S. growth," Chief Executive Officer David Abney said on a conference call.

Abney said UPS remained "a little bit cautious about the U.S. economy."

Like main rival FedEx Corp (FDX.N: Quote), UPS is often seen as a bellwether of U.S. economic health. An interest rate hike is widely expected this year.

UPS revenue fell 1.2 percent from a year ago to about $14.1 billion in the quarter. UPS said the strong U.S. dollar and lower fuel surcharges hurt growth. When reporting quarterly results in June, Memphis-based FedEx said lower fuel surcharges had cut into revenue.

UPS reported second-quarter net income of $1.23 billion, or $1.35 per share, up nearly 10 percent from $1.12 billion, or $1.21, a year earlier.

Analysts, on average, expected earnings per share of $1.26.   Continued...

An airplane is seen on the tarmac at the United Parcel Service (UPS) Regional Air Hub in Rockford, Illinois, December 9, 2014.  REUTERS/Jim Young