UPS: Volume Growth Ahead of Expectations

UPS Inc. (UPS), the world's largest shipping carrier, reiterated its profit growth guidance for the year but said total volume growth for the second quarter is ahead of earlier projections. Its shares rose 1.5 percent in early trading.

Executives of the Atlanta-based company said at an investor conference in New York on Wednesday that they expect full-year profit growth to be in the range of 16 percent to 20 percent over the adjusted $2.90 a share reported for 2004. That is the same guidance the company gave when it reported first-quarter earnings last month.

The company also said that through the first week of May, UPS (search) is well ahead of its 2 percent guidance for total volume growth in the second quarter. It did not elaborate.

UPS shares rose $2.19, or 1.5 percent, to $73.20 in morning trading on the New York Stock Exchange. Its shares have traded in a 52-week range of $66.65 to $89.11.

UPS said that through its integration of its acquisition of Menlo Worldwide Forwarding, it expects $50 million to $100 million in cost savings in 2006 and at least $200 million in 2007.

"Cost control remains a critically important objective," chief executive Mike Eskew told investors.

The company formerly known as United Parcel Service Inc. is coming off a strong first quarter in which it reported a more than 16 percent jump in profit on strong growth in revenue and its international operations.

At the same time, UPS had some bumps in the road on the domestic side in the second half of 2004.

"I'm not going to make excuses about that," Eskew said. "Nobody will."

Eskew said UPS is focused on strengthening its relationships with customers. The company also is looking to employ technology to become more efficient.

"We must execute with every quarter, every month, with every day, with every driver, with every package, without fail," he said.

Eskew said the company is on target this year to achieve $200 million in semi-variable cost reductions and $300 million in compensation expense savings. UPS previously announced a change to its management bonus program, moving from a fixed profit-sharing plan to a performance-based plan.

The company, meanwhile, continues to negotiate a new contract with its pilots. The two sides have been in federal mediated talks since last June but have not been able to reach agreement on issues involving scheduling, scope, compensation, pension and benefits.

The executive board of the pilot union at UPS said in March that it approved holding a strike authorization vote. The results of the vote are expected to be announced by Thursday.

Under the Railway Labor Act (search), the pilots can't strike while mediated talks are ongoing and no timetable has been set for when the talks will end.

Asked about the negotiations Wednesday, Eskew said the talks are ongoing and UPS is committed to rewarding its pilots, but wants to make sure it creates a business that can compete in the next generation.