UPS earnings miss; outlook is cut

United Parcel Service Inc., which has a large airfreight hub in Philadelphia, missed second-quarter earnings estimates Tuesday and cut its full-year outlook, citing broad economic uncertainty.

The world's largest package-delivery company, a bellwether for transportation companies globally, expects the U.S. economy to grow just 1 percent this year, below projections of some economists.

The delivery giant said export volumes from Asia fell more than expected in the three months ended June 30.

"Economies around the world are showing signs of weakening," chief executive officer Scott Davis said on an earnings call. "Our customers are increasingly nervous."

UPS employs 3,100 at a 681,000-square-foot package-sorting facility on Hog Island Road. The Philadelphia plant is UPS' second-largest air hub in the country, after Louisville, Ky.

U.S. shipments have slumped because of uncertainty over the coming U.S. elections and over worry about the global economy, causing businesses not to hire, make capital investments, or restock inventories, "all of which," Davis told investors, "had a negative impact on commercial volume growth."

The Atlanta company lowered its 2012 earnings forecast to a range of $4.50 to $4.70, from $4.75 to $5 a share. Analysts had expected earnings of $4.82.

For the second quarter, net income rose 2.2 percent to $1.12 billion, or $1.15 a share, compared to $1.09 billion, or $1.09 a share, a year earlier. Analysts expected $1.17 per share.

"Given these trends," Davis said, "we think current second-half economic forecasts for the U.S. are too high."

Europe's debt crisis could push many countries into recession, he said.

UPS, like rival FedEx Corp., is considered a gauge of broader economic well-being because it ships millions of packages across the globe.

Each day, UPS flies tens of thousands of packages through Philadelphia. UPS owns 212 acres on the Delaware River, including a 50-acre aircraft ramp, near the main east-west runways at Philadelphia International Airport.

The facility here handles 70,000 parcels and documents an hour. That number reaches 95,000 at peak times like Christmas, with parcels headed to and from 18 states, as far west as California.

"Electronic commerce in the U.S. continues to expand," said chief financial officer Kurt Kuehn. But other trends, "such as the lack of business-to-business growth," are worrisome.

At home, UPS sees signs of softening demand in its U.S. domestic volume growth.

Overseas, slowing global economies, shifting trade patterns, and currency fluctuations caused a 4 percent drop in second-quarter revenue, Kuehn said.

UPS will reduce its air capacity out of Asia 10 percent, mostly by reducing flight frequencies. Double-digit declines in shipments from the region to Europe and the United States "produced a notable drop in profitability" in the latest quarter, he said.

UPS, which wants to expand in Europe with the $6.7 billion purchase of Dutch package-delivery company TNT Express, said it expected to complete the purchase in the fourth quarter.

The acquisition would be the largest in UPS' 105-year history and would make it the market leader in Europe.

"Europe continues to be a good story for us," Davis said. "The intra-regional shipments within North America and within Europe are continuing to show growth."

UPS shares fell 4.6 percent to $74.34.