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UPS Cuts Forecast on Global Weakness, Uncertainty

Tuesday, 24 July 2012 08:09 AM

United Parcel Service reported quarterly results that missed forecasts and the world's largest package delivery company cut its 2012 outlook, citing uncertain global economic conditions. Its shares sank.

The company lowered its full-year outlook to $4.50 to $4.70 a share, from its prior earnings estimate of $4.75 to $5.00 per share, and said customers are more concerned about the economy in the second half of the year.

"Increasing uncertainty in the United States, continuing weakness in Asia exports and the debt crisis in Europe are impacting projections of economic expansion," Scott Davis, UPS chief executive officer, said in a statement.

The revised full-year outlook would represent an increase of between 3 percent and 8 percent over 2011 adjusted results.

"The ongoing international weakness, particularly on the air freight side, and the ongoing Euro zone crisis, is really what drove the shortfall this quarter and I suspect is weighing on the full-year outlook," said Benjamin Hartford, senior research associate at Robert W. Baird in Milwaukee, Wisconsin.

UPS on Tuesday said net earnings rose to $1.12 billion, or $1.16 per share in the second quarter, from $1.092 billion, or $1.09 per share a year earlier.

Adjusted profit rose 7.5 percent to $1.15 per share compared with $1.07 per share a year earlier, when the company recorded two real estate transactions. The estimate was for $1.17 per share.

UPS's revenue rose to $13.35 billion from $13.19 billion a year ago, but fell shy of the $13.7 billion expected on average, according to Thomson Reuters I/B/E/S.

UPS's shares fell 3.8 percent to $75.00 in premarket trading, after closing on Monday up 6.5 percent so far this year.

Atlanta-based UPS expects to close on its biggest takeover in its 105-year history in the fourth quarter -- the purchase of Dutch company TNT Express.

The company's exposure to problems in Europe will increase with its purchase of TNT Express, which will make UPS the market leader in Europe and broaden its reach in Asian and Latin American markets.

EU antitrust regulators last week said they were concerned about the combined company's high market share and broadened their investigation of UPS's bid.

UPS and No. 2 parcel delivery company FedEx are viewed as economic bellwethers because of the volume of goods they handle. The value of packages that UPS moves in its trucks and planes is equivalent to about 6 percent of U.S. gross domestic product and 2 percent of global GDP.

FedEx said in June it was stepping up cost-cutting measures, such as upgrading its fleet to more fuel-efficient aircraft, to boost profit margins while a sluggish global economy curbs shipping volume and demand for premium-priced delivery options.

© 2019 Thomson/Reuters. All rights reserved.

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Tuesday, 24 July 2012 08:09 AM
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