UPS Falls Most in a Year on ’Slow’ Forecast

Atlanta-based UPS dropped $3.39, or 4.6 percent, to $70.66 at 11:56 a.m. in New York Stock Exchange composite trading, after slumping 6 percent, the biggest intraday decline since May 6, 2010. Rival FedEx Corp. (FDX), based in Memphis, Tennessee, fell 1.7 percent to $90.30.

UPS, a bellwether of the economy that handles goods ranging from financial documents to pharmaceuticals and industrial parts, said on a conference call today that Asian growth outside of China was weaker than expected and the U.S. will continue to be “extremely sluggish.” The financial and real estate markets show slow growth amid “a broad environment of uncertainty,” Chief Financial Officer Kurt Kuehn said.

Some customers “are revisiting and trying to decide what to do and what kind of decisions to make” after missing first- half sales targets, Kuehn said in a telephone interview. “Given just the incredible turmoil that we see every day on the news, it’s not a time to be thinking about making decisions for the next six months to a year.”

‘Relatively Flat’

Second-quarter net income climbed 26 percent to $1.06 billion, or $1.07 a share. The company posted today its highest- ever second-quarter earnings per share after boosting shipping rates, as U.S. domestic volumes grew 0.1 percent. Domestic package has been “relatively flat” in July, UPS said on the call.

UPS, up 2 percent this year through yesterday, was the 10th worst-performer of the Standard & Poor’s 500 Index at 11:56 a.m.

“The domestic comment about the third quarter and the no- growth scenario, I think that’s probably the major problem for this weakness in the stock price,” said David Campbell, an analyst with Thompson Davis & Co., in Richmond, Virginia, who recommends buying the shares. “And then of course they’re not particularly precise about how the growth is going to happen in the fourth quarter.”

The U.S. recovery is slowing amid rising unemployment, which increased for the third straight month in June to 9.2 percent, and declines in sales of new homes. President Barack Obama said yesterday the U.S. may experience a “deep economic crisis” if leaders of the Congress fail to reach a deal to raise its debt ceiling. Republicans and Democrats in Congress are trying to round up votes for rival debt plans aimed at averting a U.S. default one week from today.

Reiterates 2011 Forecast

UPS reiterated its 2011 earnings forecast of $4.15 to $4.40 a share, excluding some items. Analysts predicted $4.34. The company reported earnings of $3.56 last year.

Second-quarter sales advanced 8.1 percent to $13.2 billion, driven by demand in China and Europe. UPS has added flights between the two continents to benefit from emerging-market shipping demand.

Average revenue per package rose, led by a 14 percent gain in international domestic pieces. International volume climbed 6.2 percent, driven by an 8.1 percent advance in international export shipments. The company also saw a 19 percent jump in revenue from its freight segment.

Demand in Germany, France and Turkey helped boost international domestic shipments, Kuehn said.

Excluding a gain on real-estate transactions, earnings of $1.05 a share matched the average prediction in a Bloomberg survey of 23 analysts. A year earlier, UPS reported net income of $845 million, or 84 cents a share.


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