UPS Beats Profit Estimates Despite Lower Volumes

United Parcel Service Inc on Tuesday reported a better-than-expected quarterly profit as more expensive deliveries helped the largest U.S. parcel carrier to offset a decline in volumes.

The return of foot traffic to malls and bricks-and-mortar stores caused a surge in e-commerce to dissipate, resulting in volume declines for delivery firms that dealt with a jump in online purchases in 2020.

Atlanta-based UPS saw its consolidated volumes decline 4.8% to 23.1 million in the second quarter from a year earlier as more customers returned to stores.

"Volumes are down as there is a shift from goods to services so investors are concerned that pricing will slip," said Cowen analyst Helane Becker.

Pandemic-weary consumers shifted some spending from goods to services in response to the United States lifting COVID prevention measures. At the same time, record gas prices cut into disposable income.

Shares of UPS fell 1% in premarket trading.

In April, UPS had said it expected volumes to shrink in the first half of the year before improving in the latter part of the year.

However, the delivery firm continue to report a rise in earnings, helped by its strategy that prioritizes lucrative deliveries over volume.

Higher shipping rates and fuel surcharges also helped the company to offset a decline in packages.

UPS posted second-quarter adjusted earnings of $3.29 per share, ahead of analysts' estimate of $3.16, according to Refinitiv data.

Revenue rose 5.7% to $24.76 billion, beating estimates of $24.63 billion.