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UPS says business stabilizing, stock rises 2.3 percent
July 23, 2009 / 9:37 PM / 8 years ago

UPS says business stabilizing, stock rises 2.3 percent

DETROIT (Reuters) - Shares of United Parcel Service Inc (UPS.N), rose on Thursday as the world’s largest package delivery company said its domestic and global businesses appeared to be stabilizing.

<p>A United Parcel Service Inc. aircraft is loaded with air containers full of packages bound for their final destination at the UPS Worldport All Points International Hub in Louisville, Kentucky December 20, 2006. REUTERS/John Sommers II</p>

But the company also offered an outlook for third quarter earnings per share of 45 cents to 55 cents. That is lower than the analysts’ view of 59 cents, according to Reuters Estimates.

Like its main rival FedEx Corp (FDX.N), UPS is considered to be a bellwether of U.S. economic activity.

“Declines in both our domestic and international businesses appear to be stabilizing, but volumes will remain significantly below last year’s levels,” Chief Financial Officer Kurt Kuehn said in a statement.

“Although declines in economic indicators are less dramatic than earlier in the year, questions remain as to when business activity will begin to strengthen,” he said.

The Atlanta-based company on Thursday reported second-quarter net income of $445 million, or 44 cents a share, a drop of more than 49 percent from $873 million, or 85 cents a share, a year earlier.

Excluding an after-tax charge of $48 million, earnings per share totaled 49 cents, matching analyst predictions.

Revenue fell to $10.8 billion from $13.0 billion a year ago. Analysts expected $11.1 billion.

R.W. Baird analyst Jon Langenfeld wrote in a note for clients that while the company’s third-quarter outlook was below expectations, it was “consistent with a recessionary environment and no expectations for near-term relief.”

“(UPS) stock appears fairly valued in the near term, but we continue to like the long-term prospects of UPS,” he wrote. “However, the external environment remains extremely challenging, with limited signs of a turnaround occurring before 2010.”

On a conference call with analysts, UPS said the pricing environment for packages remains “rational” despite the recession, but added it had not seen any uptick in demand from small businesses. Small businesses are the backbone of the U.S. jobs market and are considered by some analysts to be an important indicator for a broader economic rebound.

Last month, FedEx reported a wider quarterly loss and noted the next two quarters would be “extremely difficult,” but added that the pace of economic decline appeared to be slowing.

In an interview with Reuters UPS, CFO Kuehn said that although its businesses appear to have leveled out, the company has little visibility beyond the third quarter and will continue to run its operations conservatively until there are clear signs of a recovery.

“We’re not going to hold our breath and hope that a recovery is coming,” he said. “We will continue to be cautious and manage our business to current levels.”

“A big question remains around the strength of the consumer,” he added.

UPS shares closed up $1.21 or 2.31 percent on the New York Stock Exchange at $53.51.

Reporting by Nick Carey; Editing by Steve Orlofsky and Carol Bishopric

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