UPS lowers guidance in wake of persisting overcapacity trend

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Atlanta-based operator and logistics giant UPS expects lower-than-expected operating profit and revenues in the second quarter, citing a continuing trend of the US economy slowing, overcapacity in the global freight market and customers choosing lower-yielding shipping options.

"We expect the second quarter market trends to persist and UPS is adapting to meet these conditions," says Kurt Kuehn, UPS' chief financial officer, in a statement. "Despite downward revisions to economic forecasts for the second half of the year, we anticipate solid profit growth."

UPS is reducing adjusted earnings per share guidance for 2013 to a range of $4.65 to $4.85, which reflects a 3%-7% increase from 2012. The shipper previously indicated a range of $4.80 to $5.06 for 2013 guidance during its first quarter investor call on 25 April.

During that call, UPS executives described the outlook for its international air freight segment as a "rocky road" due to this overcapacity and said it had reduced air cargo capacity 20% on transpacific routes since the first quarter of 2011. UPS executives had said they expected the outlook to improve by the second half of the year and will give an update on 23 July when second quarter results are released.

UPS also indicates it saw some slowing in package volume growth in the second quarter due to labour negotiations.

UPS saw profits on international packages drop 13.7% to $352 million compared to the first quarter of 2012.