UPDATE: UPS 2Q Income Falls 49%; Sees 3Q Earnings Below Views
July 23 2009 - 9:35AM
Dow Jones News
United Parcel Service Inc.'s (UPS) second-quarter income fell
49% on continued weak demand, with the shipping bellwether warning
that conditions have yet to improve substantially and forecasting
disappointing third-quarter results.
The most optimistic view that UPS executives offered is that
business trends appear to be stabilizing.
Chief Financial Officer Kurt Kuehn said the broad economy isn't
getting "dramatically worse," but he noted that UPS remains
"cautious" on its outlook because few signs of an imminent rebound
are evident.
UPS shares were trading recently at $51.20, off 2.1%.
The company projected third-quarter earnings of 45 cents to 55
cents per share, below Wall Street's consensus forecast of 59 cents
per share, according to Thomson Reuters.
It said it expects average daily domestic package volumes to be
down about 4.6% in the third quarter, equal to the second quarter
slide. Average daily international export volumes likely will be
down 4% to 6%, after falling 7.3% in the second quarter, the
company said.
The earnings warning is the latest for UPS, which like virtually
every industry linked to freight has seen steep declines in
volume.
Earlier Thursday, German shipping company Deutsche Post AG
(DPW.XE) reported that its volumes "may have seen the bottom," but
it also said it doesn't expect world trade to make a substantial
recovery in coming months. FedEx Corp. (FDX) warned last week it
was bracing for soft demand into next year.
Kuehn told analysts on a post-earnings conference call Thursday
that "stagnant economic activity around the world negatively
impacted all of our business segments" in the second quarter, and
he said the company is bracing for more of the same until it sees
clear indications of improvement.
As a diversified transportation company that moves everything
from documents to building materials, UPS, along with rival FedEx,
is considered a barometer for the state of the U.S. economy.
UPS posted second-quarter income of $445 million, or 44 cents a
share, down from $873 million, or 85 cents a share, a year earlier.
The latest quarter included 5 cents in currency and other charges.
In April, the company projected earnings of 45 cents to 55 cents
per share, below analysts' estimates at the time.
Revenue decreased 17% to $10.83 billion. Analysts most recently
expected $11.02 billion.
Operating margin fell to 8.3% from 11.2%, while average revenue
per package fell 11%.
U.S. package revenue fell 12% as the unit's profits slid 47%. In
the international packages division, revenue dropped 24% and
profits declined 29%.
-By Bob Sechler, Dow Jones Newswires; 512-394-0285;
bob.sechler@dowjones.com
(Kerry Grace Benn contributed to this report)