"Our trends so far in July show no material uptick in growth," said CFO Kurt Kuehn on an earnings conference call. We don't have any confidence that either demand or activity is going to pick up substantially."
UPS is an important economic indicator because, at any moment, 6% of domestic GDP and 2% of world GDP is being transported within its system.
Looking ahead, the company guided to current quarter earnings of 45 cents to 55 cents, the same guidance it offered for the second quarter. "We expect business conditions in the third quarter to be similar to the second," Kuehn said.
Meanwhile, CEO Scott Davis said second-quarter results "are clear indication of the tough economic environment." He said the economy may have reached bottom, but, "Whether or not we are at the bottom is not the main issue. What is important is how long we remain here and what kind of recovery we will have."
"We will continue to manage the company under the assumption that the economy will stay at this level (until) signs of recovery materialize," Davis said.
Excluding special items, the company earned $493 million or 49 cents a share, in line with estimates. Revenue declined 16.7% to 10.8 billion. Analysts surveyed by Thomson Reuters had estimated $11 billion. A year earlier, the company earned $873 million or 85 cents a share.
Including an after-tax charge, non-cash charge of $48 million to remeasure foreign currency obligations that did not qualify for hedge accounting, the company earned 44 cents a share.
In the second quarter, average daily volume was 14.3 million, down from 15 million during the same period a year earlier. Average daily domestic package volume declined 4.6%, while domestic package revenue was down 7.8%. Consolidated revenue per piece declined 10.5% due to reductions in fuel surcharges, the effect of lighter-weight packages and negative currency impact.
"We're not thrilled with the results we had in the second quarter," Kuehn said. "We've been chasing the market down." For instance, he said, the company reduced international flying by 16% during the quarter.
On the cost side, UPS said it reduced operating expense by $985 million, excluding fuel. The company ended the quarter with $3.3 billion in cash and marketable securities.