United Parcel Service (UPS: Quote) on Tuesday cut its earnings forecast for the year, as a drop in Asian exports raised concerns about the global economy.
The world's largest package delivery company reported higher profit and revenue for the second quarter, but both missed Wall Street estimates. The stock is falling close to 4 percent in pre-market trading.
Scott Davis, UPS chairman and CEO, said, "Increasing uncertainty in the United States, continuing weakness in Asia exports and the debt crisis in Europe are impacting projections of economic expansion. 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."
Net income climbed to $1.116 billion or $1.15 per share from $1.092 billion or $1.09 per share in the same quarter last year. Adjusted net income was $1.07 per share last year. On average, 25 analysts polled by Thomson Reuters expected the company to report earnings of $1.17 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenues for the quarter rose to $13.35 billion from $13.19 billion in the prior year quarter. Analysts had a consensus revenue estimate of $13.70 billion for the quarter.
U.S. domestic revenue increased 4.1 percent to $8.06 billion, driven by a 3.5 percent gain in package volume. Average revenue per package rose 0.6 percent, as higher base rates were mostly offset by changes in customer and product mix.
Revenue slid over 4 percent in International Package to $3.01 billion, as the segment remained under pressure due to weaker global economies and reductions in exports from Asia. Currency movements also had a negative impact. Average revenue per piece was down 2.4 percent, although it grew 2.1 percent on a currency-neutral basis.
Supply Chain & Freight generated $2.28 billion in the quarter, down 1.6 percent from last year, due to slowing International Air Freight demand and lower pricing. Forwarding continued to see pressure on pricing, especially out of Asia, as excess capacity continued in the marketplace.
Looking ahead, the company now expects earnings per share of $4.50 to $4.70 in 2012. Analysts expect the company to report earnings of $4.83 per share.
While announcing the first-quarter results, the company had issued earnings per share guidance of $4.75 - $5.00 for 2012.
Further, UPS said it expects to close on the acquisition of TNT-Express during the fourth quarter.
UPS, which closed at $77.95 on Monday, is losing 3.8 percent in pre-market trading.
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by RTT Staff Writer
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