UPS cuts earnings guidance as Asia hits Q2 performance

Domestic US shipping has driven growth at UPS over the past quarter, but the company has been finding life tougher in Asian exports. Outlining its second quarter results today, the Atlanta-based integrator said overall revenue increased a fraction over 1% to $13.35bn, with earnings per share up 5.5% compared to the same period in 2011 to $1.15.

Overall package volumes increased from 14.9m to 15.4m per day, largely driven by growth in the company’s home market.

With uncertain global economies and an extended antitrust investigation into its $6bn offer for rival TNT Express, UPS told investors today it was downgrading its forecasts for earnings for the rest of the year from its previous forecast of $4.75 to $5 per share.

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“The company’s performance was mixed during the second quarter,” said Kurt Kuehn, UPS’s chief financial officer. “The results in the U.S. Domestic and Supply Chain and Freight segments were partially offset by the weakness in International.

“As we look toward the second half of the year, customers are more concerned as greater uncertainty exists. Additionally, economic growth expectations have come down,” Kuehn continued. “Consequently, we are reducing our guidance for 2012 diluted earnings per share to a range of $4.50 to $4.70, an increase of 3%-to-8% over 2011 adjusted results.”


Leading the way in the latest UPS results, US domestic revenue grew by 4.1% compared to the same quarter in 2011, to $8.06bn, driven by a 3.5% growth in package volumes and higher fuel surcharges.

With US volume per day rising from 12.6m to 13.1m for the quarter, operating profits were up 14.1% on a reported basis.

But reporting a segment “under pressure”, UPS said its international package revenue for the quarter fell 4% to $3.01bn.

With weaker global economies, the firm said any growth it saw in Europe was mostly offset by double-digit declines in exports from Asia to the US and Europe.

Volumes outside the US were down 3.2%, with revenue per piece down 2.4%.

UPS executives said this morning they will respond to the difficulties in the international market.

“Increasing uncertainty in the United States, continuing weakness in Asia exports and the debt crisis in Europe are impacting projections of economic expansion,” said Scott Davis, UPS chairman and CEO. “Throughout its history, UPS has maintained its strength in all economic cycles and we are making the adjustments necessary to respond to today’s challenging conditions.”

UPS is currently sitting on $7.3bn in cash waiting for regulatory clearance to acquire its Netherlands-based rival TNT Express. EU antitrust authorities confirmed last week that they have launched an in-depth investigation into competition concerns surrounding the EUR 9.50 per share offer for the European express heavyweight.

The EU Commission said its investigation should run until November, with UPS and TNT Express now looking for a fourth quarter completion for the deal, assuming the EU green light is given.

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