There are a couple of companies in this country that possess as much real time economic intelligence as any government agency. One is Wal-Mart Stores (NYSE:WMT) and the others are United Parcel Service (NYSE:UPS) and FedEx (NYSE:FDX). You can save yourself a lot of time researching economic trends if you just listen to what they say and what kind of numbers they post.
In that regard, UPS didn’t exactly deliver the best news today. For the quarter UPS reported a profit of $445 million on revenues of $10.83 billion. That compares to a profit of $873 million on revenues of $13 billion for the same period last year. Yikes, those are ugly numbers but they’re backward looking. So do things look better going forward?
Well, not really. Here via Calculated Risk are the words the CEO used to open the conference call today:
“On our last call we told you economic conditions for the second quarter would be slightly worse than the first and UPS performance would reflect those conditions. And that’s what happened. The results we announced today are a clear indication of the tough economic environment. As you’re aware, the rates of decline of some key economic indicators, like GDP and industrial production, have slowed. Other indicators, like manufacturing and service sector indices, are exhibiting signs of improvement. Most forecasters are saying that we may be at the bottom. Whether or not we’re at the bottom is not the main issue; what is important is how long we remain here and what type of recovery we will have. Remember, all these indicators are still well into negative territory, illustrating the challenges that lie ahead. We will continue to manage the Company under the assumption that the economy will stay at this level until definitive signs of improvement materialize.
That message was repeated several times in other comments. The company remains optimistic about the economy eventually improving but at this point in time doesn’t see any indication that’s happening. The company has reduced headcount and indicated that unless business picks up, further reductions are likely.
Their message was carefully worded, but I think pretty clear that they don’t see all that much improvement in the economy. Given that their business gives them as good a real time view of overall business activity as you’re likely to find, their observations would seem to indicate an economy that hasn’t recovered much at all yet.
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