UPS doesn't see US headed for another recession

AP News
Posted: Sep 15, 2011 2:46 PM
UPS doesn't see US headed for another recession

UPS is sticking with its earnings forecast for the full year despite what it warns will be a "bumpy ride" for the global economy.

And although slowing U.S. growth and sliding consumer confidence are bringing up comparisons to 2008, the world's largest package delivery company doesn't think the U.S. is headed for another recession.

United Parcel Service Inc. said Thursday that it still expects adjusted earnings of $4.15 to $4.40 per share in 2011, implying growth of 17 to 24 percent from 2010.

The upper end of the range is above Wall Street's expectations for earnings of $4.25 a share, according to a survey of analysts by FactSet.

Speaking at the company's investor conference in Louisville, Ky., Chief Financial Officer Kurt Kuehn said UPS has seen "momentum in the U.S. basically stall." Still, the company said it had already projected a slowing growth rate in the U.S. and sees the "slow but stable" pace continuing.

UPS is also seeing growth slow in Asia _ especially the air freight segment. Demand in the unit has been growing rapidly since the recession on strong export growth from Asia. More manufacturers are also keeping inventory low and need quicker deliveries.

This year, UPS has been beefing up its shipments to and from China and Europe as growth there outpaces other parts of the world. It's also raising prices where it can to offset slow package growth.

"We're not pessimistic in our outlook, but we're certainly not going to hang our hat (on strong) growth in the second half of the year," CEO Scott Davis said in a recent interview with The Associated Press. "We need to get jobs created. We need to get housing stabilized. Drawing a real turnaround to strong growth is going to take time."

But while it's beefing up shipments, Davis said the company isn't ready to beef up its ranks.

"Our objective would be to add jobs, but it's going to take more packages to ship," Davis said. "Our workforce will move with volume. If you're not growing at all, you're not adding jobs."

UPS is also better equipped now to do more with less. As technology improves, the company needs fewer workers to handle every package.

Kuehn said at the conference it may be 2013 or beyond before growth becomes strong again. He expects 2012 be "another under-trend year."

"The next three years might be a little bumpy," Kuehn said. Still, the company projects earnings growth of between 10 and 15 percent per year through 2016.

United Parcel Service Inc. and rival FedEx Corp. are gauges of broader economic health because consumers and businesses rely on the two behemoths to move everything from overnight documents to car parts and refrigerators.

Also Thursday, UPS raised the number of shares it plans to buy back this year to $2.7 billion from $2 billion previously.

Shares of Atlanta-based UPS fell 19 cents to $65.97 in afternoon trading.