U.P.S. Earnings Beat Expectations

United Parcel Service posted a better-than-expected profit yesterday, citing growth in its global business, supply chain and freight unit, as well as modest growth in its United States package business despite a sluggish economy.

Although U.P.S.s results should continue to be driven by its international business and gains at the supply chain and freight unit, the chief financial officer, D. Scott Davis, warned in a statement that slowing retail sales will restrain U.S. domestic volume growth. Mr. Davis is scheduled to become the companys chief executive in January.

But in an interview with Reuters, Mr. Davis said he expected United States economic growth to be a little better in 2008 than in 2007.

Like its main rival, FedEx, U.P.S. is seen as a bellwether of United States economic health, based on the premise that package volumes rise in a more vibrant economy and fall when growth slows.

U.P.S., the worlds largest package-delivery company, reported third-quarter net income of $1.08 billion, or $1.02 a share, compared with $1.04 billion, or 96 cents a share, a year earlier.

Excluding a $46 million restructuring charge and related expenses for a supply-chain business in France, earnings per share for the quarter amounted to $1.05.

Analysts on average had expected earnings per share for the quarter of $1.02, according to Reuters Estimates.

The company, based in Atlanta, reported third-quarter revenue of $12.21 billion, up from $11.66 billion a year earlier. Analysts had expected revenue for the quarter of $12.24 billion.

The story at U.P.S. is steady as she goes, despite some choppy waters in the freight market, said Keith Schoonmaker, an analyst at Morningstar.

Revenue at U.P.S.s domestic package business rose 2 percent to $7.55 billion. U.P.S.s international package business increased 12 percent, to $2.53 billion, and sales at the companys supply chain and freight unit rose 6 percent, to $2.13 billion.

I am impressed at how U.P.S. has turned supply chain and freight into a profitable operation despite a depressed less-than-truckload market, Mr. Schoonmaker said.

U.P.S. Freight is a less-than-truckload operator. Like the rest of the United States trucking market, less-than-truckload companies, which consolidate smaller loads into a single truck, have had weak freight volumes since the third quarter of 2006.

Mr. Davis, the chief financial officer, said U.P.S. Freights growth had come from taking less-than-truckload market share, which he said should continue for the next several years.

U.P.S. expects full-year earnings per share of $4.13 to $4.19. Analysts had predicted full-year earnings per share of $4.15.

U.P.S. shares were up 0.7 percent, or 55 cents, to $75.64.

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