UPS (NYSE: UPS) reported Q2 EPS of $1.21, $0.04 worse than the analyst estimate of $1.25. Revenue for the quarter came in at $14.27 billion versus the consensus estimate of $14.1 billion.

“The strong revenue growth this quarter is evidence that our portfolio resonates with customers, with more choosing UPS as their logistics provider,” said Scott Davis, UPS chairman and CEO. “As we’ve said, 2014 is the year of investing for the customer. We are providing new capabilities and expanding capacity to ensure UPS meets the rapidly growing needs of the marketplace.”

U.S. Domestic revenue increased 5.2% to $8.7 billion. Daily package volume improved 7.4%, led by gains in UPS Ground and Deferred up 8.1% and 5.4%, respectively. Adjusted operating profit was $1.2 billion, up 3.0% over the prior year second quarter. Second quarter results reflect additional operating costs associated with rail service performance and investments made to enhance operational capabilities and expand network capacity.

International small package revenue climbed 6.2% or $190 million to $3.3 billion. Strong growth in Export shipments drove revenue expansion in the segment. Adjusted operating profit improved 4.4% to $471 million.

Supply Chain and Freight revenue increased 6.5% to $2.3 billion, resulting primarily from growth in the Forwarding and Distribution business units. Adjusted operating profit was 11% higher at $176 million, and operating margin expanded 30 basis points to 7.5%.

Guidance:

UPS sees FY2014 EPS of $4.90-$5.00, versus the consensus of $5.09.

The company announced plans to increase 2014 operating expense for capacity and peak related projects to a total of $175 million. Some of these expenditures include: expanded operations on the day after Thanksgiving, accelerated deployment of route optimization software (ORION), IT development, additional hub sorts and temporary capacity. While all the projects will improve peak season performance, many will provide benefits throughout the year.

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