(Adds CEO comment)
By Lisa Baertlein and Rachit Vats
Oct 24 (Reuters) - United Parcel Service Inc reported a 20 percent rise in quarterly profit on Wednesday, but shares dropped 3.5 percent after it said the U.S. trade war with China contributed to disappointing international results.
Investors consider UPS a bellwether for the U.S. economy and they seized on news that President Donald Trump's shift to more protectionist trade policies weighed on its results.
UPS shares were down $4.04 at $110.20 in late morning trade after the company attributed an 11.6 percent decline in international package operating profit to unhedged currency in emerging markets, higher fuel costs and slowing economic activity resulting from changing trade policies.
"Concerns over unresolved trade issues between China and the U.S. as well as Brexit continued to be a focus for our customers," Chief Executive David Abney said on a call with analysts. "We are assisting them with contingency planning."
Brexit refers to Britain's exit from the European Union.
"We expect international operating profits to rebound in Q4," Abney said in an interview with Reuters.
The rapid rise in online shopping has significantly boosted domestic package volume at UPS, but the company is scrambling to cut the high cost of delivering parcels to households versus businesses, which generally receive parcels in bulk. Operating profit was down 6.1 percent for the U.S. package segment during the latest quarter.
UPS is spending billions of dollars to upgrade and expand its network to address competition from FedEx Corp and Amazon.com, and is in the early stages of its largest capital spending campaign since the 1980s.
The upcoming winter holidays will put those investments to the test. UPS expects to deliver nearly 800 million packages during that peak season, which stretches from Thanksgiving through early January.
The world's largest delivery company said revenue at its U.S. package services rose 8.1 percent in the third quarter, while revenue at its international package segment increased 3 percent.
Net income rose to $1.51 billion, or $1.73 per share, in the third quarter, as tax expense fell to $381 million.
Total revenue rose 8 percent to $17.44 billion, narrowly missing the $17.46 billion estimated by analysts.
The company stuck by its forecast for full-year adjusted earnings of $7.03 to $7.37 per share. (Reporting by Lisa Baertlein in Los Angeles and Rachit Vats in Bengaluru; Editing by Susan Thomas and Steve Orlofsky)