UPS Misses by a Penny as Asia Weakness Continues

ATLANTA(TheStreet) -- UPS (UPS) said quarterly net income rose 6%, but the company missed analysts' earnings estimates by a penny and also fell short of revenue estimates as weakness in Asian exports continued.

The largest overnight package shipper said net income was $970 million, or $1 a share. Analysts had estimated $1.01. Revenue rose 4% to $13.1 billion. Analysts had estimated $13.3 billion.

In the same quarter a year earlier, UPS earned $915 million, or 91 cents a share.

"UPS delivered earnings growth in line with our expectations, driven by the results of the U.S. domestic and supply chain and freight segments," said Kurt Kuehn, UPS's chief financial officer. "Our performance reflects the strength of our global portfolio and the adaptability of the UPS operating model."

Kuehn reaffirmed guidance for full-year earnings of $4.75 to $5 a share, up 9% to 15% from 2011 results.

During the quarter, revenue in the U.S. domestic package segment rose 6.1% to $8 billion and operating profit rose to $995 million from $880 million.

In the international package segment, revenue rose 2.3% to $2.97 billion while operating profit fell to $408 million from $453 million.

"Continued weakness out of Asia and increased intra-regional volumes also negatively impacted yield growth," the company said. Operating margin declined to 13.8% from 15.6%, reflecting the impact of increased fuel cost, changing product mix and shifting trade patterns.

In the supply chain and freight segment, revenue rose 1.3% to $2.17 billion, while operating profit climbed 19% to $166 million. "Revenue was negatively impacted by declines in both tonnage and yield as excess capacity in the market continues," the company said.

During the quarter, the company generated $1.8 billion in free cash flow. Capital expenditures were $417 million including payments for delivery of three Boeing 767 aircraft. UPS also repurchased 7.1 million shares for about $550 million and paid dividends totaling $534 million.

In premarket trading, UPS shares were down 2.9% to $77.33.

-- Written by Ted Reed in Charlotte, N.C.

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