UPDATE:UPS 1Q Net Falls 56%, Projects 2Q Earnings Below Views
April 23 2009 - 11:55AM
Dow Jones News
United Parcel Service Inc.'s (UPS) first-quarter net income fell
56% as the global economic slump sapped shipping volumes and the
company opted to retire some aircraft amid soft demand.
UPS, the world's largest package-delivery company, also forecast
second-quarter profit below Wall Street's expectations. It said
second-quarter domestic package volume will be down 4% to 6%, after
falling an average 4.3% in the first quarter.
"The second quarter will be a bit more challenging than the
first," Chief Financial Officer Kurt Kuehn told analysts on a
post-earnings conference call Thursday.
UPS said it expects second-quarter earnings of 45 cents to 55
cents a share. Analysts polled by Thomson Reuters projected 65
cents.
Still, UPS executives voiced some optimism that the U.S. economy
will bottom later this year and then begin a recovery. They said
Asian economies appear to be on the same trajectory, although they
added that a recovery in Europe could take longer.
As a diversified transportation company that moves everything
from documents to building materials, UPS, along with rival FedEx
Corp. (FDX), is considered an economic barometer.
UPS shares were down 5.5% at $51.69 in recent trading.
The company posted first-quarter net income of $401 million, or
40 cents a share, down from $906 million, or 87 cents a share, a
year earlier.
The results included a write-down related to the retirement of
44 McDonnell Douglas DC-8 aircraft. The company said it was
retiring the entire DC-8 fleet earlier than expected because of
overcapacity.
Earlier this month, FedEx said it was grounding 14 aircraft for
much the same reason.
Excluding items, UPS said it earned 52 cents in the first
quarter, the low end of its February forecast. Revenue fell 14% to
$10.94 billion. Analysts polled by Thomson Reuters most recently
expected $11.44 billion.
Operating margin fell to 6.6% from 11.8%, while consolidated
average daily volume - which includes international shipments -
slid 3.9% and average revenue per package fell 6.9%. The company
said per-package revenue slipped in the quarter because customers
opted to reduce package weights to save money, and because of
reduced fuel surcharges.
-By Bob Sechler, Dow Jones Newswires; 512-394-0285;
bob.sechler@dowjones.com
(Kerry E. Grace contributed to this report)