UPS Sees Rise in Profits and Strong Holiday Season

United Parcel Service said more demand in its domestic ground shipments had lifted company profits during the third quarter. UPS said it expects sales online during the heavy holiday shopping season to boost its shipping volumes going forward.

Shares of the courier business were up 2% on the news Friday prior to the markets opening. UPS, which received and delivered over 1 billion packages across the globe during last quarter, reconfirmed its outlook for profit for 2013.

Shipment forecast and volume at UPS as well as with Fed Ex its rival are watched closely on Wall Street and considered a good indication of the health of the economy due to the large amount of goods both transport.

For the holiday season this year, UPS announced it expects a strong season with daily volume increasing by 8%, with Cyber Monday volumes increasing by 10%.

Earlier during the week, FedEx released a forecast that said its increases for that same day would be 11%. Cyber Monday is the Monday following Thanksgiving that has traditionally been a huge day for online sales for the holidays.

UPS in the third quarter saw it ground shipping volumes increase by 3%, while its next day volumes fell by 3.3%. Clients have traded down from the pricey air deliveries of next day to the less expensive shipping that takes additional time, but saves money.

In addition, retailers and manufacturers are more savvy with supply chains and are planning their shipments more strategically to cut expenses on express shipping.

This lowers the costs for the manufacturers but in turn hurts the couriers like UPS, which earns more money on shipping that is faster.

UPS announced that some shippers moved distribution facilities nearer to customers, which slowed the growth of air shipping, but led to a higher use of ground facilities at UPS.

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