UPDATE 4-UPS profit tops estimates; holiday outlook unclear
* Profit of 55 cents/shr tops 52-cent consensus
* Revenue down 14.9 pct
* Sees Q4 profit of 58-65 cents/shr
* Says holiday outlook unclear
* Shares down .84 percent (Adds CFO, analyst, investor quotes, background)
By Scott Malone
BOSTON, Oct 22 (Reuters) - United Parcel Service Inc (UPS.N), the world's largest package delivery service, reported a 43 percent drop in earnings that nonetheless topped analysts' forecasts, saying that cost-cutting helped its profit margins.
But the company said on Thursday that the outlook for holiday season -- when it transports orders from major retailers as well as consumer purchases -- remained unclear, with online merchants more confident about the season than their bricks-and-mortar rivals.
"As I look at the global business environment, I am encouraged that recovery is underway," Chief Executive Scott Davis said on a conference call with analysts. But he cautioned that the economy had "a long way to go."
The Atlanta-based company took a more conservative tone than its main rival FedEx Corp (FDX.N), which said last month that the economy appeared to be stabilizing.
"They are way more cautious than the management team at FedEx. Both companies reported strong earnings, but the commentary for the next quarter and next year is different," said Guaylon Arnic, analyst at Profit Investment Management, which owns UPS shares.
Its shares were down .84 percent, or 48 cents, to $56.62 in late morning on the New York Stock Exchange.
LESS HOLIDAY HIRING
UPS, which has cut its headcount by some 17,000 jobs over the last year, plans to continue its normal practice of adding temporary workers to help with the holiday rush.
This year it will likely add about 50,000 -- fewer than usual -- U.S. seasonal, executives said on a conference call. That is down from the 60,000 it added in the pre-downturn 2007 holiday season.
UPS current employs about 400,000 people worldwide.
Retailers from Wal-Mart Stores Inc (WMT.N) to Amazon.com Inc (AMZN.O) are facing a bleak season, consumers planning to spend about 3.2 less, according to a survey by a trade group.
Four of five online retailers plan to offer free shipping, with conditions, at some point during the holiday season -- a move that could spur demand for UPS and FedEx's services.
PROFIT TOPS STREET VIEW
UPS said on Thursday that third-quarter profit fell to $549 million, or 55 cents per share, from $970 million, or 96 cents per share, a year earlier.
Analysts on average had looked for earnings of 52 cents per share, according to Thomson Reuters I/B/E/S.
Revenue tumbled 14.9 percent to $11.15 billion, while analysts were expecting $11.17 billion.
Operating expenses, factoring out volatile fuel prices, were down 6.6 percent.
Daniel Ortwerth, analyst at Edward Jones in St. Louis, said the results came "down the middle of expectations."
"It's just the reality of this business, and this uncertain, choppy, recovery, that we shouldn't be expecting very strong results yet," Ortwerth said.
UPS estimated 2009 capital expenditures at about $1.7 billion, some $500 million below its initial forecast.
The company said it expected fourth-quarter earnings of 58 cents to 65 cents per share. Wall Street had expected 63 cents.
"We're confident that there is some recovery afoot, but we do see it as somewhat fragile," said chief financial officer Kurt Kuehn, in an interview.
Because they handle a large chunk of the consumer and commercial packages that crisscross the country each day, UPS and FedEx are regarded as bellwethers of the economy.
So far this year, UPS shares are up about 5 percent, trailing the 11 percent climb of the Dow Jones transportation average .DJT. (Reporting by Scott Malone, additional reporting by Nick Zieminski in New York, editing by Maureen Bavdek, Lisa Von Ahn and Gunna Dickson)
