CHICAGO -- United Parcel Service Inc reported a lower-than-expected first-quarter profit Thursday as businesses and consumers tightened their belts and sent fewer packages because of the global economic downturn.
The U.S. economic bellwether also gave a second-quarter outlook below analysts' expectations and warned that while economic recovery may begin in late 2009, it is more likely to come in 2010.
The world's largest package delivery company reported net income of $401 million, or 40 cents a share, compared with $906 million, or 87 cents a share, a year earlier.
Excluding an impairment charge for the early retirement of the company's fleet of DC-8 jets, UPS earned 52 cents per share in the quarter.
Analysts on average had expected earnings of 56 cents a share, according to Reuters Estimates.
"The results are miserable, but we expected misery," said Edward Jones analyst Dan Ortwerth. "And all bets are off as to when that misery will end."
But Ortwerth said the company's healthy cash position of $4.3 billion and cash flow of $1.9 billion at the end of the first quarter were strengths he was stressing to his clients.
The decision by UPS to retire its DC-8 fleet was a sign of how robust and flexible the company is, he added.
"This is a very strong company," he said. "And in a storm that's what you want -- a company that's able to ride out the storm."
Atlanta-based UPS said first-quarter revenue fell to $10.94 billion from $12.68 billion. Analysts had expected $11.42 billion.
Like Memphis-based rival FedEx Corp, UPS has seen its U.S. and international business hit by the global recession. Last month, FedEx reported a 75 percent decrease in quarterly net profit.
Both companies are considered bellwethers because consumers ship more packages in a boom, but shipments wane when the economy cools.
Recovery may not come as soon as many have hoped.
"Economic indicators tell us recovery in the United States might begin late this year, but more likely not until 2010," Chief Financial Officer Kurt Kuehn said in a statement. "So we expect the second quarter will be another difficult one."
As a result, the company said it expects to earn 45 cents to 55 cents per share for the period. Analysts on average had forecast 65 cents.
In trading before the market opened, UPS shares were down 2.3 percent at $53.50.
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