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UPS profit down in 1Q
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April 19, 2001: 2:26 p.m. ET
Slowing economy hurts shipments, but delivery company tops lowered forecasts
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NEW YORK (CNNfn) - A slowing of the U.S. economy hurt profit at package deliverer United Parcel Service, although it edged above lowered first-quarter forecasts Thursday.
The world's largest transportation company earned $582 million, or 51 cents a share, excluding special items, 1 cent a share better than the 50- cent earnings per share forecast of analysts surveyed by First Call. That consensus was lowered from 57 cents a share after a March 22 warning from the company.
Atlanta-based UPS (UPS: up $2.45 to $56.90, Research, Estimates) earned $674 million, or 56 cents a share, in the year-earlier period.
Revenue grew 4 percent to $7.5 billion. The number of packages moved by ground, the company's core business, showed less than a 1 percent gain to a daily average of 10.2 million in the quarter. But UPS posted a better than 3 percent gain in its overnight and two-day shipments, and nearly a 10 percent increase in its international shipments. Overall shipment volume gained 2 percent to a daily average of 13.4 million.
"We were pleased that UPS maintained its growth across all product segments, particularly our international and domestic express businesses," said Jim Kelly, UPS' CEO. "However, the economy did slow much faster than we expected and we were not satisfied with our earnings performance."
The company also said it can reach the lower end of the 55 cent-to-60 cent a share EPS range for the second quarter that it forecast March 22, when it lowered its estimate from the then 64-cent consensus forecast.
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It announced it is trimming capital expenditures by about $300 million this year to a $2.5 billion level, and that further cuts are possible in 2002 and 2003 if weakness in the economy continues. UPS also said it would trim discretionary spending.
Slowdown felt across trucking
UPS wasn't the only trucking company showing the effects of the slowing economy in its earnings reports Thursday.
USFreightways Corp. (USFC: down $0.62 to $27.38, Research, Estimates) missed lowered forecasts for the period when it reported net income of $8.5 million, or 32 cents a share. Analysts surveyed by First Call were forecasting the Chicago-area based company would earn 39 cents a share, forecasts that were lowered after a March 9 warning from the company. It earned $22.3 million, or 81 cents a share, a year earlier. Overall revenue was basically flat at $621.4 million, up 0.4 percent from year earlier levels.
"The disappointing results of the first quarter were clearly affected by the current economic slowdown," said a statement from Samuel Skinner, the company's CEO and a former secretary of transportation. "We do not see any indication that the slowdown is over and we believe that it will continue at least through the remainder of the year."
Skinner said the company would continue cost-cutting efforts and increase marketing activities. But those cost-control efforts will be difficult. Even though the company cut 5 percent of its staff in its core trucking operations last November, the equivalent of almost 1,000 jobs, it saw labor costs in the unit increase due to higher wages and health insurance costs.
Ryder tops lowered forecasts
Ryder Systems Inc. (R: up $1.12 to $19.72, Research, Estimates) was able to beat lowered forecasts despite a drop in income.
The Miami-based company, a component of the Dow Jones transportation average, earned $17.1 million, or 18 cents a share, excluding a special charge. That's down from the net income of $19.8 million, or 33 cents a share, it reported a year earlier, when there were fewer shares outstanding.
Analysts surveyed by First Call had lowered forecasts to 16 cents a share after the company warned on March 29 that it would earn between 13 and 17 cents a share. Before that warning the consensus forecast stood at 20 cents a share.
The company said it expects to do better than current forecasts in the rest of the year, saying it should earn between 40 and 44 cents a share in the second quarter, and $1.00-to-$1.05 a share for the second-half of the year. First Call's forecast called for EPS of 37 cents in the second quarter, and 96 cents a share over the last two quarters.
With a restructuring charge in the most recent period Ryder's net income came in at $4.1 million, or 7 cents a share. Revenue at Ryder fell to $1.28 billion from $1.31 billion a year earlier.
Landstar profit improves, but trucking company warns
Landstar System Inc. (LSTR: down $2.47 to $68.88, Research, Estimates) was one of the few transportation companies to post improved results in the first quarter as it met forecasts, although it warned full-year results will come in a little short of full-year expectations.
The trucking company earned $8.4 million, or 96 cents a share in the quarter, up from $8.3 million, or 89 cents a share a year earlier. Revenue edged up $331.3 million over the $327.0 million year earlier.
The company said it expects full-year EPS of $5.70 to $6.00. First Call had been forecasting $6.05 for full-year EPS. 
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