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UPS to miss 3Q estimate
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September 28, 2001: 10:37 a.m. ET
Traffic still lags pre-Sept. 11 level; attack cost estimated at $130M
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NEW YORK (CNNfn) - United Parcel Service Inc. cut its third-quarter earnings guidance Friday, saying shipments have yet to fully recover from the drop in the wake of the Sept. 11 terrorist attack.
The world's largest transportation company said it expects third-quarter earnings of 45 to 48 cents per share, rather than its previous guidance of 52 to 55 cents.
Shares of UPS (UPS: up $2.26 to $51.98, Research, Estimates) gained about 4.5 percent in trading Friday despite the warning.
"During the week of the attacks, volume declined more than 10 percent as shippers across the country reduced their activity," UPS said. "Although it has rebounded, volume is not yet back to early-September levels, particularly in the air operations and internationally."
Analysts surveyed by earnings tracker First Call had estimated before the attack UPS would earn 53 cents a share, and the consensus EPS estimate had been shaved to 52 cents before Friday's warning. The company earned 60 cents a share in the third quarter a year earlier.
The company did not provide guidance for earnings in the fourth quarter, which begins Monday and includes the key pre-holiday shipping season. First Call's fourth-quarter EPS estimate is 56 cents, down from 63 cents a year earlier.
The company has issued a series of warnings since last December as a slowing U.S. economy cut freight shipments and revenue. The company said it had been on track to meet its third-quarter guidance before the Sept. 11 attack.
The company said its costs due the attack are about $130 million, including the cost of a temporary shutdown of its air operations and the reduced package volume.
Federal help on the way
UPS said the current estimates do not include any funds the company could receive as a result of the federal assistance package for the nation's airlines, which was recently approved. The first payments from those funds, equal to about half the grants to be awarded under the program, were disbursed Thursday. The rest should go out sometime early next month, which will be the fourth quarter for most airlines.
The $5 billion in direct federal aid will be divided based on a comparison of each airline's passenger or freight capacity, with passenger carriers capturing about 90 percent of the available assistance.
UPS did not estimate how much it is likely to receive from the package, but the Air Transport Association estimated it is likely to get about $120 million, assuming it can prove damages of at least that amount. But ATA admits its estimates for cargo carriers are questionable, and a source in the freight industry said that estimate is much too high.
UPS has filed the paperwork to receive federal assistance but, unlike many passenger carriers, has yet to receive any of the money, UPS spokesman Norman Black said. He said he could not comment on the amount of assistance UPS expects to receive.
FedEx Corp. (FDX: up $2.00 to $36.75, Research, Estimates) the world's largest air cargo carrier, issued a statement early Friday evening that said it received its first payment of federal assistance, worth about $101 million.
The passenger carriers said that this week's payments constituted about half of the allocation of federal help, but FedEx spokesman Greg Rossiter said he couldn't speculate on the total assistance that FedEx is to receive. ATA's estimate for FedEx's allocation was $210 million.
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Despite the hit on revenue and profits, UPS and other freight carriers are in far better position than the passenger airlines, whose ticket sales are far below earlier levels and only about half what is needed to break even.
UPS also entered the crisis in a much better cash position than most companies, airline or otherwise. The day U.S. stock trading resumed, UPS announced it had resumed a $1.3 billion share repurchase program. It had $3.1 billion in cash, cash equivalents, marketable securities and
short-term investments on its balance sheet at the end of the second quarter. 
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Fed air payments of $2.5B arrive - Sept. 27, 2001
Airline losses could ground U.S. economy - Sept. 21, 2001
Airline executives warn of bankruptcies - Sept. 19, 2001
Airline stocks see steep selloff - Sept. 17, 2001
UPS, Fedex to resume ops late Thursday - Sept. 13, 2001
UPS CEO Kelly to retire - Aug. 16, 2001
UPS, Union Pacific 2Q profits drop - Jul. 19, 2001
UPS warns on 1Q & 2Q, cites economy - Mar. 22, 2001
UPS beats lowered 4Q forecasts - Jan. 30, 2001
UPS, FedEx warn on earnings - Dec. 14, 2000
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