Earnings Preview: UPS

UPS Inc., the world's largest shipping carrier, is scheduled to report second-quarter results on Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: The Atlanta-based company, also know as United Parcel Service, along with rival FedEx Corp. are seen by economists and analysts as bellwethers of the global economy, since they deal with such basic indicators of company health as orders and product shipments.

UPS has seen weaker package volume due to cutbacks by businesses amid the U.S. recession.

The company has been cutting costs and jobs. An executive has said UPS cut 10,000 domestic jobs in the first quarter through attrition and part-time employees leaving and not being replaced.

The company previously said economic indicators suggest recovery in the U.S. might begin late this year, but more likely not until 2010.

BY THE NUMBERS: Analysts surveyed by Thomson Reuters, on average, expect UPS to post second-quarter earnings of 49 cents a share on revenue of $11.02 billion. Analysts generally exclude one-time items from their estimates. UPS has said previously it expected to post second-quarter earnings per share in a range of 45 cents to 55 cents. It also said it expected U.S. domestic package volumes to decline 4 percent to 6 percent in the April-June quarter. A year ago for the second quarter, UPS posted a net profit of 85 cents per share on revenue of $13 billion.

ANALYST TAKE: Standard & Poor's analyst Jim Corridore, in a recent research note, reiterated his "Hold" opinion on shares of UPS. He said UPS' second-quarter results would likely be affected by weak volumes and pricing. "We are not expecting UPS to say they are seeing strengthening demand, but will be looking for signs that demand has bottomed," he said. Despite the down economy, Corridore said that UPS is likely to remain a strong cash generator.

WHAT'S AHEAD: UPS has said it won't furlough any of its pilots through April 1, 2010, after the union reached a deal with the company announced in June that includes more than two-thirds of the cost cuts the company wanted. UPS has said the Independent Pilots Association identified savings totaling roughly $90 million over three years through pilots taking short- and long-term leaves of absence, military leaves, job sharing, reductions in flight pay guarantees, early retirement, and sick bank contributions. UPS sought $131 million in pilot savings over the next three years to avoid furloughing, or idling, roughly 300 pilots. The IPA said it would continue to work this year to produce additional savings.

STOCK PERFORMANCE: UPS shares rose less than 1 percent during the second quarter, on a split-adjusted basis. Accounting for a dividend issued during the quarter, UPS shares closed at an adjusted price of $49.64 on April 1 and ended the quarter June 30 at an adjusted price of $49.99.

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On the Net:

UPS Inc.: http://www.ups.com