United Parcel Service is expected to report a 40 percent increase in quarterly profit on Tuesday as more confident consumers opened their wallets.

The gain might be less than estimated by Wall Street because of unusually harsh winter storms and higher fuel costs that slowed momentum from higher holiday sales, improved efficiency and pricing, several analysts said.

UPS had estimated a 7.5 percent gain in 2010 peak season shipments between Thanksgiving and Christmas.

Efficiencies and pricing drove up fourth-quarter profit on top of rising holiday deliveries, said BB&T analyst Kevin Sterling.

Fuel and weather are going to impact them in the fourth quarter, and that will constrain the upside, but it's all about their outlook.

UPS, the world's largest package delivery company, says it handles 6 percent of the U.S. GDP and 2 percent of global GDP in its trucks and planes. Its shipment trends provide a tangible view of consumers' spending mood.

The strongest consumer spending in more than four years and robust exports spurred fourth-quarter economic expansion, government data showed on Friday.

Consumer spending accelerated in the final month of the quarter, the government said on Monday.

During the quarter, Atlanta-based UPS announced rate increases that began January 3. Analysts will scrutinize UPS's guidance for 2011 for signs that the higher prices are sticking and volumes are rising.

The company's outlook will shed light on its view of consumer spending during a tenuous recovery marked by unemployment at 9.4 percent.

Analysts expect a fourth-quarter profit of $1.05 per share, up 40 percent from 75 cents a year earlier, according to Thomson Reuters I/B/E/S. Revenue is seen rising to $13.4 billion from $12.38 billion.

Challenging weather and rising fuel prices led Deutsche Bank to pare its near-term estimates for UPS and rival FedEx Corp , but share weakness on the results would be a buying opportunity, the analysts wrote on Monday.

FedEx and UPS utilized the downturn to improve their cost structures, which we believe will drive above-historical peak operating margins in this cycle, the analysts said.

Both companies have increased their international revenue bases, which have above-average pricing (revenue/package) as well as high incremental margins.

UPS shares have gained about 20 percent in the past year. That tops the rise of nearly 15 percent for FedEx, but lags the 27 percent gain in the Dow Jones Transportation Average <.DJT>

FedEx in December raised its fiscal full-year outlook on record holiday shipments, business in Asia and emerging markets growth.

Fedex