UPS Adjusts Earnings Expectations Due to Slowing Economy

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United Parcel Service of America Inc. expects to show volume increases across all products for the first quarter, but domestic volume growth has slowed during the past two months to approximately 1 percent, the company said yesterday.


Atlanta-based UPS cited the slowing economy as the primary reason for lower earnings. The first quarter ends March 31.


UPS said other factors also have impacted results, including harsh weather conditions this winter, continuing weakness in the value of the euro, softening cargo revenues, high utility costs and a difficult comparison with last year's strong first quarter, which included an extra operating day.


"We anticipated the first quarter would be difficult and thought we could achieve earnings per share slightly above last year," said Scott Davis, UPS chief financial officer. "The economy has [proved] to be even more challenging, and therefore we do not believe we will attain that target."


If current economic conditions persist, Davis said, UPS expects second-quarter earnings to be 55 cents to 60 cents per share, compared with 60 cents per share in last year's second quarter.


"Even in a slow economy, we anticipate modest increases in domestic volume and in revenue per piece and continued generation of industry-leading margins," he said.


However, Davis said UPS' logistics and international businesses have continued to show strong growth. International export package volume, for example, has grown more than 15 percent so far this quarter.


UPS' announcement follows a similar statement made this week FedEx Corp.


FedEx's earnings were down for the third quarter compared with the year-ago period. Like UPS, FedEx attributed the downturn to the slowing economy.


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