UPS is keeping to its profits outlook for this year despite FedEx’s warning that profits thisquarter will be hit by a mix of severe weather and rising oil prices.
UPS CFO Kurt Kuehn stressed yesterday that the company is maintaining its forecast of earningsper share of between $4.12 and $4.35 for this year. This would be 16% to 22% higher than theadjusted EPS figure of $3.56 for 2010 and exceed the previous record level set in 2007.
Speaking at the BB&T Capital Markets Transportation Services Conference in Miami, Kuehn didadmit however, that January had been a “brutal” month for the company due to the severe weather inthe USA. “It has been a challenging operating environment,” he commented. UPS has not issued aspecific earnings forecast for Q1, 2011.
Earlier this week, FedEx scaled back its December 2010 – February 2011 profits guidancesignificantly. It now expects as-adjusted earnings, excluding FedEx Freight combination costs, of$0.70 to $0.90 per diluted share for the third quarter ending February 28, compared to the previousguidance of $0.95 to $1.15 per diluted share. In comparison, the company reported earnings of $0.76per diluted share in last year’s third quarter. It will also update its outlook for the full June2010 – May 2011 fiscal year at its March 17 Q3 results announcement.
The UPS share price closed up 1.15% at $75.66 yesterday while FedEx was 0.90% higher at $96.84.FedEx’s share price has not been significantly impacted by its Q3 profits update that was releasedon Tuesday.
Meanwhile, Kuehn also reiterated UPS’ growth strategy for this year at the Miami event. Thecompany would build up its global healthcare network, introduce new products and solutions,including for small packages and freight, and continue to invest in technology, he said. UPSexpected to take delivery of five B767 and two B747 freighters and would press ahead with its Asiaexpansion strategy.
UPS had identified its key emerging markets, would develop strategic alliances with experiencedpartners and enhanced products and services in those markets, Kuehn added. Referring to Europe, hedescribed Europe-US business as stable and highlighted “tremendous growth” in Europe-Asia flows.“We are still very excited about Europe-Europe even in a sluggish economy,” he said. Companies wereincreasingly moving towards pan-European distribution strategies which created new growthopportunities.
For 2011 as a whole, UPS expected its US domestic package margin to improve, with ‘mid-to-highsingle digit’ revenue growth and volume growth in line with US GDP. The international packagebusiness would have a similar operating margin as in 2010, with revenue and operating profit growthof about 10%, Kuehn told analysts.
