UPS: Global Economy Getting Worse

NEW YORK (AP) — UPS expects the global economy to get worse before it gets better. Again.

The world’s largest package delivery company is more pessimistic about U.S. 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 on Tuesday lowered its forecast for all of 2012 and said its third-quarter earnings will fall below last year’s results.

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 more than 4 percent in midday 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 percent 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 U.S. economy, by far the world’s largest, will grow just 1 percent this year. The company cited stalling growth from U.S. service companies, lower retail sales and still-high unemployment as signals that the U.S. isn’t holding up as well as UPS anticipated just three months ago.

Although economists have been cutting their projections, estimates for U.S. economic growth this year are still in a range of about 1.8 percent to 2 percent.

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

UPS cut its full-year earnings forecast by 25 cents per share to $4.50 to $4.75. Wall Street had been expecting earnings of $4.82, according to FactSet.

For the three months ended in June, UPS said net income rose 2 percent to $1.12 billion, or $1.15 per share, compared with $1.09 billion, or $1.09 per share, a year earlier. Analysts expected $1.17 per share according to FactSet.

Revenue for the Atlanta company rose 1.2 percent to $13.35 billion.

In the U.S., revenue rose 4 percent from a year earlier, driven by a higher volume of packages. UPS said the increase was mostly due to a higher number of packages ordered from Internet retailers.

Overseas, revenue fell 4 percent on lower exports from Asia and falling revenue per package, an indication of lower prices.

Revenue in UPS’ supply chain and freight business fell 1.7 percent. That segment includes both UPS’ long haul trucking business and a unit that helps manufacturers streamline and make their businesses more efficient.

A month ago, rival FedEx Corp. warned that slow global economic growth will crimp its earnings over the next 12 months.

UPS said Tuesday that it’s cutting some flights out of Asia and reducing the frequency of others over the next several quarters to counter slowing demand. That amounts to a 10 percent cut in capacity on Asia flights, on top of a previous 10 percent reduction.

The company warned it would take additional actions, if necessary, to bolster its financial results.

UPS does see one bright spot ahead: it believes fourth-quarter earnings will be buoyed by major technology product launches ahead of the busy holiday season. Apple Inc. is expected to release a new version of the iPhone in the fall.

United Parcel Service to roll out Motorola digital scanners

United Parcel Service Inc. is deploying a new type of wearable scanner for employees designed to accelerate package loading and information visibility.

The new device, made by Motorola Solutions, consists of a hands-free imager that is worn on a finger and a small terminal worn on the employee’s wrist or hip.

The imager is a major advancement because it automatically scans based on label-sensing technology, allowing UPS employees to more quickly image barcodes compared to the current “point and shoot” method available with existing equipment, according to a news release.

The scans are key to providing the tracking data that feeds the 32.1 million tracking requests viewed daily on, the release said.

The scanner sends each package’s tracking information via Bluetooth to the terminal worn on the wrist or hip. The data is then transmitted via Wi-Fi to the UPS facility network and ultimately to UPS’s global data centers to be stored and processed for access by customers.

The imager also helps avoid service disruptions by verifying that a package is being loaded into the proper trailer or air container. An audible and visible alert identifies any package that’s about to be loaded incorrectly.

UPS began deploying the new system last year, and 28,000 ring imager and terminal devices are in use at 480 facilities. The deployment will be completed by the fourth quarter of 2013 with more than 38,000 ring imager and terminal devices in use at 1,383 facilities.

Atlanta-based UPS (NYSE: UPS) bases its UPS Airlines division in Louisville.

UPS’s Worldport facility in Louisville is a 5.2 million-square-foot sorting hub — its largest sorting facility. The facility can sort about 416,000 packages/documents per hour.

“UPS is always examining new ways to improve our delivery reliability and provide timely and accurate shipment information to our customers,” Juan Perez, UPS vice president of information services, said in the release. “Effectively deploying mobile and pervasive computing technologies like this allows us to achieve those goals, with higher performance, and a more rugged, longer- lasting piece of hardware.”
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