A drumbeat of uncertainty and low consumer confidence pervaded UPS' second-quarter results Tuesday, even as the company reported sales growth of 8 percent and its highest-ever second quarter earnings per share.
The Sandy Springs logistics company emphasized the difficulties in the U.S. and world economies, saying economic conditions have slowed as the recovery remains uneven.
"It's a very sluggish U.S. economy," UPS Chief Financial Officer Kurt Kuehn said. "There's a lot of uncertainty right now."
But Kuehn said UPS has expanded during the down economy and was able to adapt to changing conditions and make money despite challenges. He expects 2011 to be UPS' strongest year yet. The company made $1.06 billion in the quarter, compared with $845 million a year ago, a 26 percent increase.
The continuing debate about the national debt ceiling has made some businesses delay decisions, Kuehn said. Ocean shipping from Asia has been slower than usual and could indicate that Christmas-time inventories will be low unless retailers opt for pricier air freight later in the season. Kuehn said additional air freight would be beneficial to UPS, but it is too soon to tell what the next several months will bring.
"The verdict is still out," he said. "We're looking forward to being Santa's helper, but it's still a little early to see how full the sleigh will be."
UPS also said domestic shipments were flat in the quarter. Revenue increases there came from rising base rates and fuel surcharges. The company's supply chain and freight business saw big improvements in operating profit and sales.
The company earned $1.05 a share, excluding benefits from two real estate transactions. Including those transactions, diluted earnings were $1.07 a share. But UPS' stock fell more than 4 percent after its call, closing down 3.32 percent, or $2.46, at $71.59 a share.
UPS' results showed the company is running its business well, Stifel Nicolaus transportation analyst David Ross said. While UPS' size means it is affected by macroeconomic factors, Ross said the company is expanding its offerings and growing internationally, and he expects good results as the economy improves.
In a Tuesday conference call, Kuehn said he anticipates a good fourth quarter, even though 2011 has been a difficult year to predict. The third quarter, he said, will still be slow.
UPS Chairman and CEO Scott Davis said in the call that the mood of the country can change quickly.
"I wouldn't say we're pessimistic about the future," he said. "We're just uncertain about how much the economy will grow."
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