Business

UPS cuts forecast

Wednesday, July 25, 2012    

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NEW YORK, USA - UPS sees a tough road ahead for the global economy.

The world's largest package delivery company is more pessimistic about global growth than many economists. It predicts global trade will grow even slower than the world's economies -- a trend not seen since the recession. It's making cuts in its business and reducing its earnings projections.

UPS lowered its forecast for all of 2012 and said its third-quarter earnings will fall below last year's results yesterday.

Customers are worried about the global economy weakening in the second half of the year, the company said. Their skittishness was also felt in the second quarter, where UPS missed analysts' expectations for both earnings and revenue. The stock fell almost four per cent in morning trading.

"Economies around the world are showing signs of weakening and our customers are increasingly nervous," Chairman and CEO Scott Davis said in a conference call with analysts.

That sentiment, along with similar comments from chemical maker DuPont, weighed on investors, who are already nervous about the global economy. The S&P 500 index dropped 0.5 per cent in the morning. UPS is a closely watched barometer of broader economic health because it moves millions of packages between consumers and businesses every day.

UPS said it expects the US economy, by far the world's largest, will grow just one per cent this year. The company cited stalling growth from US service companies, lower retail sales and still-high unemployment as signals that the US isn't holding up as well as UPS anticipated just three months ago.

Although economists have been cutting their projections, estimates for US economic growth this year are still in a range of about 1.8 per cent to two per cent.

This marks the third straight year growth has stalled at mid-year after getting off to a promising start.

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