UPS (UPS) offered a sobering economic outlook on Thursday, saying the current quarter will likely be even worse than the first and the recovery will not begin until 2010.
The biggest package shipper, which saw its first-quarter profit drop 43%, is an important economic indicator because, at any given moment, it has 6% of the U.S. GDP and 2% of the world's GDP in its system.
Based largely on economic data and Easter's move from March to April, UPS said it anticipates current quarter earnings of 45 cents to 55 cents a share. Analysts had been estimating 65 cents. UPS shares were 4% lower at midday, when they traded at $52.45 a share.
"Hopefully we'll hit bottom later this year and begin seeing growth at the end of this year or early next year in the U.S.," said CEO Scott Davis, during an earnings conference call. He said Asia would likely recover at the same pace, but Europe "most likely will lag the rest of the world in the pace of its recovery."For UPS, declining economic trends mean lower package volumes and lower package rates. "Industrial production numbers were horrible in the first quarter," Davis said. "Whenever (they) decrease, it challenges the weight of our packages, which does put pressure on us." During the quarter, average domestic package weights fell by 8%. On the positive side, UPS -- like competitor FedEx (FDX) -- says it is gaining market share due to the decision by DHL to largely cease its U.S. operations. UPS "captured a little more than half of
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV