UPS, the logistics company, reported another drop in quarterly profits on Tuesday, in line with expectations, while predicting the economy would gather momentum as the year progressed.
“Economic forecasts indicate gradual improvement as 2010 unfolds,” Kurt Kuehn, chief financial officer of UPS, said. “The first quarter will be the most challenging of the year for UPS with profitability only slightly better than last year.”
US container traffic signals retail optimism - Jan-11In depth: US downturn - Nov-17UPS’s comments are closely watched by the market because its deliveries of packages and goods provide analysts with a useful barometer of the health of the global economy.
In early trading UPS shares rose 1.1 per cent to $58.39.
The company also included a full year forecast for the first time since the downturn began, predicting that earnings per share would come in between $2.70 and $3.05 this year, almost a third better than 2009 at the upper end of the range.
Mr. Kuehn said the goals were “ambitious” but achievable given the “firming economy”, improved pricing environment and increased volumes that the company was seeing.
Still the company is keeping tight control of costs. UPS is planning capital expenditure for the year of about $1.8bn, well below its historical norm, and intends to cut 1,800 jobs over the next year, generating savings of about $160m a year from 2011.
In the fourth quarter of 2009, UPS reported net income of $757m, or 75 cents per share, down from $829m, or 83 cents per share, in the same period in 2008. The 2008 net income number excludes a $575m impairment charge.
Revenues slipped 2.5 per cent to $12.38bn, as 5.8 per cent growth in the international package segment due to strong performance in Asian markets was offset by weaker but stabilising US domestic package and supply chain and freight segments.
In January UPS boosted its fourth-quarter forecast to between 73 cents per share and 75 cents per share, thanks to the impact of cost savings and an improved operational performance.
For the full year, net profits excluding the impact of foreign exchange and impairments ,fell 35.3 per cent to $2.3bn, or $2.31 per share, on revenues down 12 per cent $45.3bn.
“The company demonstrated its ability to manage effectively in changing market conditions,” said Scott Davis, UPS chairman and chief executive. “UPS has emerged from the worst recession in decades leaner, more focused and better positioned to take advantage of increased global trade.”
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