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UPS posts lower Q2 profit as customers opt for slower services

Published: 09:08 23 Jul 2013 EDT

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United Parcel Service Inc. (NYSE:UPS), the world’s biggest package-delivery company, posted a 4 percent drop in second-quarter profit amid a slowing U.S. economy and as customers shift to slower, cheaper shipping services. Shares slid in premarket trading.

Net income in the three months ended June 30 skidded to $1.07 billion, or $1.13 a share, from $1.12 billion, or $1.15 a share, in the year-earlier period, the Atlanta, Georgia-based company said in a statement on Tuesday.

Revenue grew 1.2 percent to $13.51 billion.

“Results were below our expectations as a result of disappointing performance in freight forwarding and a slight miss in International package,” Chief Financial Officer Kurt Kuehn said in the statement.

UPS shares edged down 0.1 percent to $87.50 at 8:40 a.m. in New York on Tuesday. Shares gained 18.8 percent this year through Monday, matching the S&P 500 Index (INDEXSP:.INX). FedEx Corp. (NYSE:FDX), the world's largest shipping airline, gained 17.5 percent.

Shippers struggle amid tepid economic growth and as customers opt for slower, less costly international shipping services.

U.S. Domestic second-quarter revenue improved 2.3 percent to $8.24 billion. Operating profit was relatively flat compared to last year. Operating margin was 13.7 percent, down slightly due to changes in customer and product mix along with higher pension costs and challenging year-over-year comparisons from the timing of fuel surcharges, according to the statement.

Second-quarter revenue from international operations increased 1.6 percent to $3.06 billion.

“Market conditions and shipper preferences clearly impacted our freight forwarding and International business,” Chief Executive Officer Scott Davis, who took over in 2008, said.

For the second half of the year, UPS said it projects growth in adjusted diluted earnings per share of 4 to 13 percent over the same period last year. 

 

 

 

 

 

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