UPS's Recent Quarter Is Bailed Out By International Strength

| About: United Parcel (UPS)

UPS (NYSE:UPS) Tuesday reported a 7.2% increase in diluted earnings per share for the second quarter to $1.04 on a 3.9% gain in revenue. Strong performance by the international package segment and encouraging trends in supply chain and freight overcame a challenging U.S. small package market. Consensus estimates were calling for $1.03 on $12.23 billion in sales.

There was nothing really significant about the report for investors in UPS. Margins improved slightly, but EPS grew at the low end of management’s long-term guidance range of 6-10%. Guidance of $0.99-$1.04 for next quarter’s earnings has a midpoint below the current $1.02 consensus. Cash flow was strong as usual.

I said in my earnings preview that UPS tends to provide a good read on the overall economy. If the U.S. small package market is weak, that says something about the strength of the U.S. small businesses and consumers who buy and sell the items being shipped. Given that the large trade imbalance shows that U.S. consumers are helping support the world’s manufacturers, one then has to wonder how long the international package segment will post a strong performance.

Rolling all of the segments together, the 3.9% gain in revenue is fair but not great. The world economy has been growing faster in recent years. For U.S. centric investors, the international exposure is a great help, though, as the growth there was far greater.

UPS 1-yr chart:

UPS 1-yr chart