UPS warns that earnings will fall due to slowing economy

United Parcel Service today announced it expects first quarter earnings to be in the range of 49 to 51 cents a share, which compares to earnings of 56 cents a share in the same period last year.

The company cited the slowing economy as the primary reason for lower earnings.

UPS had previously said it expected first-quarter earnings of 57 cents a share.

Looking ahead, UPS said it expects second-quarter earnings will be in the range of 55 to 60 cents a share, compared to 60 cents last year. The company had anticipated it would be able to top last year’s second quarter performance by a penny a share.

“The slowing has been so significant and so quick that we’re not going to beat prior year for the first two quarters,” said UPS spokesman Norman Black.

The UPS announcement came one day after FedEx Corp. reported a five-percent drop in earnings for the quarter ended Feb. 28.

Despite the earnings drop, UPS said it will show across-the-board volume increases for the first quarter, but that domestic volume growth has slowed during the last two months to approximately 1%. In contrast, international export package volume has remained strong, growing more than 15% thus far in the quarter.

In addition to the economy, other factors that have affected results include harsh weather conditions this winter, continuing weakness in the value of the Euro, softening cargo revenues, high utility costs and a difficult comparison to last year’s strong first quarter, which included an extra operating day.

Scott Davis, UPS’s chief financial officer, commented, “We anticipated the first quarter would be difficult and thought we could achieve earnings per share slightly above last year. The economy has proven to be even more challenging and therefore we do not believe we will attain that target.”