UPS Issues Earnings Warning
washingtonpost.com
By Justin Bachman
AP Business Writer
Thursday, Dec. 14, 2000; 4:34 p.m. EST
ATLANTA –– United Parcel Service and FedEx Corp. said a marked slowdown in holiday shipping blamed on a slowing economy will crimp earnings, though not immediately in FedEx's case.
The busiest days of the holiday delivery season occur next week, but UPS said Thursday it has seen an "unusual slowdown" in domestic consumer shipments that contributed to flat volume for the two weeks ending Dec. 8. As a result, the Atlanta-based company warned that its income and volume for the fourth quarter will be below Wall Street estimates.
Shortly after the UPS announcement, FedEx Corp., the second largest ground shipper, issued a statement saying "softening" shipping volume this month caused by the economy and poor weather would trim its earnings growth next year.
Shares of UPS fell 6 percent on the news, while FedEx shares plunged 9 percent.
The flat shipping volume is simply a reflection of consumers' increasing unease with their financial health, said Jeff Medford, an analyst with William Blair and Co. in Chicago.
"They've been hit hard by substantially higher energy costs, the stock market has basically tumbled and you have all of the uncertainty of the presidential election," Medford said.
"Spending can dry up very quickly when you feel there is uncertainty out there with your job and how much money you feel you have."
Atlanta-based UPS said it now expects to earn 60 to 62 cents per share for the fourth quarter, down from the 64 cents per share forecast by analysts surveyed by First Call/Thomson Financial. UPS earned 56 cents per share during the same quarter last year.
UPS' earnings revision follows slowing growth in domestic volume in October and November to 4 percen Thanksgiving and Christmas, including 19 million on Tuesday, its busiest shipping day.
The company was "a little surprised by the severity of the slowdown," said Kurt Kuehn, vice president of investor relations.
But, he added, Y2K-related deliveries last year had contributed to huge gains unavailable this quarter.
UPS said it will still meet its 2000 financial targets, with revenue for the full year expected to increase 10 percent and profits to increase in the "mid-teens." Analysts have put UPS' full year earnings at $2.40, according to First Call.
FedEx said its domestic growth rates were expected to be flat or slightly lower this month, but still expects to meet Wall Street's expectations. However, shipping levels this month could hinder profits in the next quarter, the company warned.
The Memphis-Tenn.-based company said it expects earnings of 67 cents per share in the current quarter, up from 57 cents per share a year ago, when it reports earnings Dec. 20. Analysts surveyed by First Call/Thomson Financial had projected 64 cents per share.
For 2001, the Memphis, Tenn.-based company said it expects to earn $2.50 to $2.60 per share, compared with $2.32 a share this year. Analysts had pegged 2001 earnings at $2.68 per share, according to First Call.
Those numbers are based "on a soft economic landing," said Alan Graf Jr., FedEx's chief financial officer.
UPS shares fell $3.94 to $58.69 in afternoon trading Thursday on the New York Stock Exchange. FedEx was down $4.31, to $41.97. |
