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UPS warns on 1Q, 2Q profit
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March 22, 2001: 9:51 a.m. ET
Parcel company issues second warning due to impact of slowing economy
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NEW YORK (CNNfn) - Parcel deliverer United Parcel Service warned Thursday that it will fall short of earnings expectations in the soon-to-be-completed first quarter, the second straight period it has been forced to issue such a warning.
Atlanta-based UPS again blamed the slowing economy as the primary reason for lower earnings. It said it now expects to earn 49 to 51 cents per share rather than 57 cents expected by analysts surveyed by earnings tracker First Call. The company earned 56 cents a share in the year-ago period, its first full quarter as a public company.
 UPS also warned on its second quarter results, saying it now expects earnings per share in the 55 to 60 cent range. First Call's forecast is for EPS of 64 cents in that period, up from the 60 cents posted in the year-earlier period.
"Even in a slow economy, we anticipate modest increases in domestic volume and in revenue per piece, and continued generation of industry-leading margins," UPS's chief financial officer Scott Davis said.
UPS is the world's largest transportation company, and it carries an estimated 7 percent of the nation's gross domestic product in its trucks and planes each year, so a slowing in shipments is bound to hit profits.
Bear Stearns analyst Ed Wolfe lowered his forecast for UPS earlier this week, citing a slowing economy, though he took his first quarter estimate down to only 56 cents.
"We believe that UPS is well positioned to adjust its costs down to match slower volume growth," he said as he lowered estimates. "Nevertheless, the slowdown in volume growth that we are expecting is likely to put pressure on UPS' operating margins. As we have lowered our volume growth assumptions for '01 and '02, we have also assumed worse margin performance."
The company's warning comes the day after competitor FedEx Corp. edged past forecasts for the period ended Feb. 28 while telling analysts it has seen recession-like traffic levels due to the slowing economy.
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On Dec. 14, both UPS and FedEx warned about the previous quarter's results, saying that slower-than-expected pre-holiday shipments would cause them to miss estimates. But when FedEx issued its earnings statement Wednesday, it said strong cost controls will allow it to meet estimates for its next quarter despite the slowdown in freight.
UPS said the current quarter also is being hurt by harsh weather conditions this winter, continuing weakness in the value of the Euro, softening cargo revenues, high utility costs, and a difficult comparison with last year's strong first quarter, which included an extra operating day.
Shares of UPS (UPS: Research, Estimates) opened Thursday at $54.61, down $3.09. 
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