UPS Earnings Decline 49%, to $445 Million, as Downturn Saps Demand
United Parcel Service, the world's largest package delivery company, said on Thursday that its second-quarter earnings fell 49 percent as the recession cut business demand.
It forecast that its profit in the third quarter will be lower than analysts' projections.
Second-quarter profit declined to $445 million, or 44 cents a share, compared with $873 million, or 85 cents a share, a year earlier. Sales dropped 17 percent, to $10.8 billion.
Package volume in the United States slid for a sixth consecutive quarter as the recession caused businesses to reduce orders amid the highest unemployment rate in 26 years. The company said shipments would remain "significantly below" those for last year. UPS is considered an economic bellwether because it delivers a wide variety of items, including clothing, auto parts and financial documents.
"A lot of us got excited by those initial signs of stabilization, and now we're realizing it's going to be more of a 2010 event before we see real recovery," said Nathan Brochmann, an analyst at William Blair & Company in Chicago. He rates the shares market perform.
UPS, based in Atlanta, said profit for the three months through September will be 45 to 55 cents a share, less than 60-cent average of analysts' estimates.
"We are cautious, frankly," the company's chief financial officer Kurt Kuehn told analysts and investors on a conference call. "We don't have any confidence that either demand or activity is going to pick up substantially" in the next several months.
Domestic volume fell 4.6 percent in the second quarter, the worst results since the company's 1999 initial public offering. The measure will probably decline at a similar pace this quarter, Mr. Kuehn said. International volume tumbled 5.5 percent and will not improve this quarter, he said.
The number of hours UPS airplanes were in operation declined 11 percent, saving 14 million gallons of fuel and contributing to a 54 percent drop in the company's total fuel bill to $539 million as oil prices collapsed from a year earlier.