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UPS quarterly profit rises, sees strong holiday volumes

United Parcel Service aircraft are loaded with air containers full of packages bound for their final destination at the UPS Worldport All Po
United Parcel Service aircraft are loaded with air containers full of packages bound for their final destination at the UPS Worldport All Po

(Reuters) - United Parcel Service Inc said increased demand in domestic ground shipments lifted profits in the third quarter and expects online sales to boost shipping volumes as it heads into the holiday quarter.

Shares in the courier company rose 2 percent on Friday before the markets opened.

UPS, which delivered more than one billion packages worldwide during the quarter, also reconfirmed its profit view for the year.

Shipment volume and forecasts at UPS, along with rival FedEx Corp , are closely watched by Wall Street and considered an indication of overall economic health because of the vast amount of goods they transport.

For this year's holiday season, UPS said it expects peak season daily volume to increase by 8 percent, with pick-up volumes for Cyber Monday increasing 10 percent. Earlier in the week, rival FedEx forecast an 11 percent rise for the same day, the Monday after Thanksgiving that is traditionally a big day for online holiday sales.

For the third quarter, UPS said daily ground shipping volumes rose 3 percent, while next-day shipping fell 3.3 percent. Clients have been trading down from pricey next-day air deliveries to more affordable shipping ways that take more time, to save money.

Also, manufacturers and retailers have become more savvy with their supply chains, planning shipments strategically to cut back on express shipping. This reduces costs for manufacturers, but hurts courier companies like UPS, which make more money on faster shipping.

UPS said some shippers have moved their distribution facilities closer to their customers, which slowed air shipment growth but led to a greater use of UPS Ground facilities.

For the third quarter, the Atlanta-based company earned $1.10 billion, or $1.16 a share, compared with $469 million or 48 cents a share a year earlier. The company expects earnings of between $4.65 and $4.85 per share for the current year.

Revenue came in at $13.52 billion, up 3.4 percent over last year, mainly helped by U.S. e-commerce shipments and strong European export growth.

Analysts, on average, were expecting the company to earn $1.15 a share, on revenue of $13.6 billion, according to Thomson Reuters I/B/E/S.

Shares of the company were trading at $96.54 Friday morning before the bell. They closed at $94.49 Thursday on the New York Stock Exchange.

(Reporting by Nivedita Bhattacharjee in Chicago; Editing by Gerald E. McCormick and Krista Hughes)

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