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A FedEx truck passes by competing United Parcel Service truck in Palo Alto, Calif. (Paul Sakuma/AP)
A FedEx truck passes by competing United Parcel Service truck in Palo Alto, Calif. (Paul Sakuma/AP)

UPS quarterly profit drops, revenue disappoints Add to ...

United Parcel Service Inc. reported lower quarterly profit on Tuesday, citing slowing global trade, and said there was “some uncertainty” about the strength of the coming holiday season.

Earnings per share at UPS, the world’s largest package delivery group, matched estimates, but quarterly revenue fell from a year ago and missed the Wall Street view.

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UPS and rival FedEx Corp. are viewed as economic bellwethers because of the volume of goods they handle. The value of packages that UPS moves on its trucks and planes is equivalent to about 6 per cent of U.S. gross domestic product and 2 per cent of global GDP.

“We’re seeing a slower growth environment and customers continuing to shift to slower modes of transport,” said Edward Jones analyst Logan Purk. “Freight still moves, but on a cheaper mode of transport that affects revenues and therefore profitability.”

Mr. Purk put a “hold” rating on the stock, citing the pending €5.2-billion ($6.7-billion U.S.) takeover of Dutch peer TNT Express – the biggest purchase in UPS’s 105-year history – as well as the slowing economy and cautious customers.

UPS earnings declined to $469-million or 48 cents share, in the third quarter, from $1.07-billion, or $1.09 a share, a year earlier.

“Our results were achieved in an environment of slowing global trade and changing market dynamics,” chief executive officer Scott Davis said in a statement.

UPS reported higher profit in its international segment, but has adjusted its network to cope with slowing shipments from Asia and increased demand for cheaper shipping options.

In August, the company said it would restructure pension liabilities and record an aftertax, non-cash charge of $559-million in the quarter.

Adjusted earnings were $1.06 per share, matching analysts’ estimates, compared with $1.09 a year ago.

UPS revenue totalled $13.07-billion in the quarter, down from $13.17-billion a year ago. Analysts expected $13.3-billion, on average, according to Thomson Reuters I/B/E/S.

“While there is some uncertainty around the magnitude of the holiday shopping season, we are confident in UPS’s ability to deliver,” chief financial officer Kurt Kuehn said in the statement.

UPS forecast 2012 adjusted earnings between $4.55 and $4.65 per share, which would be 5 per cent to 7 per cent above the 2011 figure. It narrowed the range from $4.50 to $4.70.

Analysts expect $4.56 a share, according to Thomson Reuters I/B/E/S.

FedEx, the No. 2 package delivery group, has already cut its fiscal 2013 forecast, warning that the weakening economy was driving more customers to cut costs by picking cheaper shipping methods for goods ranging from auto parts to personal computers.

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