(Reuters) - United Parcel Service (UPS.N) posted a better-than-expected quarterly profit on Tuesday and forecast 9 percent to 15 percent growth this year as solid U.S. demand and growing e-commerce activity offsets an uneven global economy.
UPS reported its fourth-quarter profit was down sharply as the result of a change in how the world’s largest package-delivery company accounts for its pension expenses. Factoring that change out, profit would have risen, helped by strong growth in the company’s consumer business — driven by online shopping during the recent holiday season — which offset less-robust growth outside the United States, analysts said.
“Better-than-expected margins in both domestic and supply chain offset margin weakness in international. But international volume growth, export volumes, were consistent with expectations,” said Benjamin Hartford, a senior research associate at Robert W. Baird in Milwaukee.
Atlanta-based UPS set an initial 2012 profit target of $4.75 to $5 per share for 2012, which would represent 9 percent to 15 percent growth over 2011 levels and at its midpoint is above the $4.80 per share analysts had expected.
Its shares gained about 30 cents to $76.47 in early New York Stock Exchange trading.
Chief Executive Scott Davis said on a conference call with analysts that UPS expects continued strong demand in its home market. “The U.S. is one of the few economies where expectations are greater than last year,” Davis said.
In December, smaller rival FedEx Corp (FDX.N) reported above-forecast quarterly profits on on-line sales, cost curbs, fuel surcharges and other higher rates paid by shippers. It also announced a fleet upgrade meant to shave fuel costs.
UPS said fourth-quarter net income fell to $725 million, or 74 cents a share, from $1.025 billion, or $1.02 a share, a year ago. Its results for the just-ended quarter included a $527 million charge related to a change in how it accounts for pension expenses.
After adjusting for the pension-accounting shift, profit came to $1.28 a share, above the $1.26 analysts, on average, had expected, according to Thomson Reuters I/B/E/S.
UPS’s decision to adopt “mark to market” pension accounting brings its practices in line with other major U.S. employers, including Honeywell International Inc (HON.N) and Verizon Communications Inc (VZ.N).
The shift can give companies a quick boost by removing billions of dollars in old pension losses from operating results, and bring companies closer to international accounting standards for pensions that become effective in 2013.
Fourth-quarter revenue at UPS rose 6 percent to $14.2 billion, compared with the $14.4 billion expected by analysts.
UPS’s shares are up 7.7 percent over the past year, outpacing the 2.9 percent rise of the broad Standard & Poor’s 500 index .SPX. FedEx has risen 1.9 percent over that period, lagging the S&P 500.
The value of packages that UPS handles in its trucks and planes is equivalent to 6 percent of U.S. gross domestic product and 2 percent of global GDP.
Reporting By Lynn Adler, writing by Scott Malone; editing by John Wallace and Maureen Bavdek