UPS lowers forecast for the year

UPS is bracing itself for weak second quarter (April-June 2013) results and is lowering its full year’s earnings guidance to well below market forecasts - a strong indication that recovery in the global economy remains fragile.

Kurt Kuehn Raymond James UPS

The US package delivery giant said that “overcapacity in the global air freight market, increasing customer preference for lower-yielding shipping solutions, and a slowing US industrial economy drove revenue and operating profit below expectations.”

In addition, UPS experienced some slowing in package volume growth as a result of labour negotiations.

“We expect the second quarter market trends to persist and UPS is adapting to meet these conditions,” said UPS’ Chief Financial Officer, Kurt Kuehn. “Despite downward revisions to economic forecasts for the second half of the year, we anticipate solid profit growth, he added.

Of the factors cited by UPS to explain the disappointing outlook, Arthur Hatfield, a transportation analyst at asset management firm, Raymond James, highlighted lower-yielding shipping solutions.

He said there had been an “acceleration” in the trade down and “this is becoming a bigger problem in the express sector than excess capacity.”