Ahead of its second-quarter earnings report, UPS has reduced its earnings-per-share guidance for 2013 by $0.20 per share. Second-quarter earnings are now expected to come to $1.13 per share.
UPS officials blamed overcapacity in the air freight market, slowing U.S. industrial activity and shippers' preference for lower-yielding solutions for the earnings reduction. They also pointed out that the company has seen a slowdown in the volume growth of packages due to labor negotiations.
"We expect the second quarter market trends to persist, and UPS is adapting to meet these conditions," said Kurt Kuehn, the company's chief financial officer, said in a statement. "Despite downward revisions to economic forecasts for the second half of the year, we anticipate solid profit growth."
The investment firm Cowen and Company, in a guidance email, sees the issues at UPS as indicative of a larger trend in the industry.
"We believe the industry is going through a secular change as customers continue to opt for lower cost alternatives to priority air. UPS started to adapt by reducing capacity in Asia, but given the slow growth in the U.S., many UPS customers have been focused on cost cutting. We do not expect to see a significant uptick in next-day priority services until we see a global recovery, and not just a U.S. recovery," the firm said.
UPS will release its second-quarter report on July 23. - Jon Ross