UPS Cuts 2012 Forecast As Slowing Economy Press Profit

UPS Cuts 2012 Forecast As Slowing Economy Press Profit

By Heather Perlberg - Jul 24, 2012
United Parcel Service Inc. (UPS), the world’s largest package-delivery company, cut its full-year forecast after a drop in international package sales dragged quarterly profit below analysts’ estimates.
Earnings for the full year may be $4.50 to $4.70 a share, down from a previous projection of $4.75 to $5, the Atlanta- based company said. Profit of $1.15 a share in the second quarter trailed the average estimate from analysts of $1.17.
UPS is considered an economic bellwether because it moves goods ranging from financial documents to pharmaceuticals and industrial parts. International Package sales dropped 4 percent and Supply Chain & Freight revenue declined 1.6 percent as excess capacity for Asian exports pressed pricing, the company said.

“International volume is particularly weak,” Kevin Sterling, an analyst at BB&T Capital Markets in Richmond, Virginia, said in a telephone interview. “They are not immune from China softening and everything happening in Europe.”
UPS dropped 4 percent to $74.80 at 8:50 a.m., before the start of regular trading in New York. The shares previously gained 6.5 percent this year.
Net income climbed 2.2 percent to $1.12 billion, from $1.09 billion, or $1.09 a share, a year earlier, as U.S. domestic package revenue increased. Volume gains there were driven by lightweight shipments from online retailers to their customers, UPS said.
Companywide revenue climbed 1.2 percent to $13.3 billion, UPS said. Growth was slower than last quarter’s 4.4 percent expansion partly because of customers opting for less expensive shipment options.
“The deferred products are still leading the pack,” Logan Purk, an analyst at Edward Jones & Co. in St. Louis, said in a telephone interview. “Clients are still choosing the slower methods of delivery and that is impacting results in terms of yield.”