United Parcel Service, the world's largest package-delivery company, posted first-quarter sales that beat analysts' estimates on increased demand overseas.

Revenue climbed 7.2 per cent to $11.73 billion (Dh43bn), exceeding the $11.64bn average of 14 analyst estimates compiled by Bloomberg. Net income gained 33 per cent to $533 million, Atlanta-based UPS said yesterday. The firm announced per-share profit excluding one-time items of 71 cents on April 14.

UPS benefited from an 18 per cent rise in international packages, and US domestic shipments climbed 0.4 per cent, for the first gain in more than two years. UPS and FedEx are considered economic bellwethers because they deliver goods ranging from industrial parts to medical supplies to consumer electronics.

"UPS's global strategy clearly proved beneficial in the first quarter," said Scott Davis, Chairman and CEO of UPS. "Our broad product portfolio and solutions-based approach to customers' logistics needs enabled the company to capture new business. In addition, our worldwide integrated network generated significant margin expansion. With global economies showing signs of recovery and UPS's strong start to 2010, we are optimistic about this year and the future."

For the three months ended March 31, consolidated volume totaled 940 million packages, a three per cent increase. Average revenue per piece also increased three per cent, reflecting general rate rises and higher fuel surcharges.

In the quarter, UPS incurred a $98m pre-tax restructuring charge related to the reorganisation of the US Domestic Package segment; a $38m pre-tax loss on the sale of a specialised transportation business in its supply chain unit in Germany, as well as a $76m non-cash charge to income tax expense resulting from a change in the tax filing status of a German subsidiary. The impact of these charges reduced net income by $175m and diluted earnings per share by $0.18.

During the quarter, UPS opened the second phase of its Worldport air hub expansion, improving sort capacity from 350,000 to 416,000 packages per hour. The expansion helps further optimise the air network, enabling the use of larger and more fuel efficient aircraft.

The international package segment posted an 18 per cent jump in revenue with operating profit increasing 45 per cent. Average daily volume also increased 18 per cent during the quarter, outpacing market growth once again with all regions contributing. Export volume increased more than nine per cent due to strong growth in all major trade lanes.

Non-US domestic volume increased 24 per cent, driven by an acquisition in Turkey in the third quarter of last year, as well as 13 per cent organic growth, powered by strength in core European countries. In the quarter, UPS began operating its new intra-Asia air hub in Shenzhen, China, slashing at least a day off shipment time-in-transit. The company also opened a state-of-the-art facility at the Calgary International Airport to expedite international shipments.

"Pay attention to the difference between UPS's US and international performance, and the difference is big," said Dan Ortwerth, an analyst at Edward Jones & Co in St Louis, who cut his recommendation on UPS to 'hold' from 'buy' this month. "I'm not fully convinced this is a sustainable US economic recovery yet. It's getting harder to predict" domestic economic growth prospects.

GDP increased 3.3 per cent in the first quarter, the median projection of economists in a Bloomberg survey ahead of tomorrow's US Commerce Department report.

"UPS achieved significant operating leverage in an improving global economic environment," said Kurt Kuehn, Chief Financial Officer of UPS. "In the first quarter we realised the benefits from the hard work we have been doing to streamline our operations. First quarter results exceeded our expectations and set a strong foundation for the rest of 2010.

"We expect first quarter trends to continue through the year, producing revenue growth and additional operating leverage," he added. "Therefore, UPS recently raised adjusted earnings guidance for the year to a range of $3.05 to $3.30 per diluted share, an increase of 32 to 43 per cent over adjusted 2009 results.

"Going forward, we're determined to sustain the enhancements we've made to our cost structure," Kuehn said. "We'll continue to invest for the future while remaining focused on disciplined, profitable growth. We're very confident that our diversified, global product portfolio will help us capitalise on the growth opportunities ahead."

UPS has stopped giving quarterly earnings forecasts and will provide that information only on an annual basis, said Andy Dolny, Vice-President of investor relations. UPS switched to quarterly guidance for 2008 and 2009 from its annual forecasts because of uncertainty regarding the recession.

The firm also reiterated its full-year outlook for earnings of $3.05 to $3.30 a share.

UPS said this month that the per-share profit of 71 cents for the first quarter excluded costs of $175m related to a restructuring of US package operations, a loss on the sale of a German unit and a tax expense. Net income a year earlier was $401m, or 40 cents.

UPS reported a 2.9 per cent increase in average revenue per item delivered, showing that rising demand is beginning to restore its ability to increase prices.

"Base pricing was up in both air and ground, and we expect that positive trend to continue in 2010, especially in air," Kuehn said on a conference call with investors and analysts.

Volume for domestic next-day air packages, among the most profitable offerings, slid 3.9 per cent because of weak demand for documents related to mortgages and other financial transactions, executives said on the call.

Domestic volumes were helped by retail, healthcare and technology shipments, while manufacturing is "spott" with "gradual firming month to month", Kuehn said in an interview.

UPS slid $2.30, or 3.4 per cent, to $66.22 at 4.02pm in New York Stock Exchange composite trading as the broader market fell. The shares have gained 15 per cent this year. (with inputs from Bloomberg)