UPS expected to post flat 3Q profit
NEW YORK -- United Parcel Service Inc. is expected to offer a subdued view of the global economy when it reports its third-quarter results before the market opens Tuesday.
WHAT TO WATCH FOR: Any inkling that growth is slowing further. Three months ago, UPS predicted the global economy will get worse before it gets better. Smaller rival FedEx Corp. said the same in September. Both have also said trade around the world is weak and mimicking trends not seen since the recession.
Last month FedEx unveiled a plan to boost profit by $1.7 billion annually by shedding jobs, aircraft and underused assets. UPS is making cuts as well.
Much of the hardship felt by package delivery companies is due to the sluggish global economy. Shipments out of Asia and into Europe are slowing. But consumers are also opting for slower shipping methods to save cash. And gadgets and other electronics, which tend to be shipped by air, are getting lighter. That's dragging down results for air express shipments, traditionally been the most lucrative segment for UPS and FedEx. Apple Inc.'s iPhone 5, for example, is 17 percent lighter than the first generation model.
Last week Citi analyst Christian Wetherbee cut his earnings forecast for UPS, citing weaker volumes in premium shipping categories and rising fuel costs. Wetherbee is still recommending the stock, because he expects package volumes will get better next year and the company will reap benefits from its pending acquisition of Dutch delivery company TNT Express.
WHY IT MATTERS: As the world's largest package delivery company, UPS can offer unique insight into the pace of the global recovery. Because it handles so many consumer and business shipments worldwide, its results may foreshadow broader economic trends.
WHAT'S EXPECTED: Analysts forecast net income of $1.06 per share on revenue of $13.32 billion, according to FactSet. That profit matches last year's results, although UPS expects its earnings will fall under the year-ago quarter.
LAST YEAR'S QUARTER: The Atlanta company earned $1.04 billion, or $1.06 per share, in last year's third quarter, on revenue of $13.17 billion.