UPS sticks with its outlook as 2Q earnings rise

AP News
Posted: Jul 26, 2011 6:17 PM
UPS sticks with its outlook as 2Q earnings rise

UPS said on Tuesday that the sluggish U.S. economy will continue to impact its results this year, but it will grow earnings by raising prices and improving volume overseas.

In a conference call with analysts, CEO Scott Davis said the global economy is still recovering at an uneven pace, with strength in China and Europe outpacing other areas. And while fuel prices have come down and production slowdowns in Japan because of the earthquake and tsunami in March appear to be clearing up, high unemployment and weak consumer confidence continue. The continuing debate about the U.S. debt ceiling adds to the uncertainty.

UPS is often viewed as a bellwether of the U.S. economy because it handles shipments for a wide range of businesses, and talk of ongoing weakness in its core domestic market unnerved investors. Shares fell $2.46, or 3.3 percent, to close at $71.59 Tuesday after losing as much as 6 percent earlier in the session.

Still, the world's largest package delivery company maintained its outlook for the year. It expects adjusted earnings of $4.15 to $4.40 per share, implying growth of 17 to 24 percent from 2010. The upper end is above Wall Street's expectations. Analysts, on average, predict earnings of $4.34 per share.

In the second-quarter, UPS earned $1.06 billion or $1.07 per share, compared with year-ago earnings of $845 million, or 84 cents per share.

Revenue rose 8.1 percent to $13.19 billion.

Analysts polled by FactSet Research expected a profit of $1.12 per share on $13.26 billion in sales.

Sales in its U.S. business rose 6.4 percent. International revenue climbed 13.3 percent led by continued strength in Asian and European exports. Revenue in UPS' freight and supply chain business, where it helps companies make their warehouses and overall operations more efficient, increased 7 percent. That was mostly due to higher prices in its trucking operation.

The company's operating profit in the supply chain and freight segment leaped 77 percent from a year ago. Its U.S. package unit operating profit rose by 29 percent, but it fell 4.6 percent in the international segment due to lower margins.

United Parcel Service Inc., based in Atlanta, shipped 957 million packages between April and June, or about 15 million per day.


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