UPS Lowers 2Q Earnings Expectations

moreluck

golden ticket member
copy of a response letter from the CFO when a concern was expressed about the low stock value..........

Scott mentioned that you had inquired as to our buyback activity and that
there was some nervousness among our retirees about what is going on with the
stock. I offered to send you a quick update. Feel free to share this
information openly.

I know that this is a tough time for the markets and now for UPS stock also. We did have to revise our earnings outlook for the 2nd quarter significantly
below the previous numbers that we gave earlier. The stock reacted strongly,
probably in part due to the fact that FDX lowered their longer term guidance
dramatically the previous week. At this point we have not commented beyond
this quarter. We have certainly seen slow economies before and in some cases
UPS earnings have declined, but as a public company it does now create a level
of price volatility that we did not see when we were public.
Although the current environment of sky high fuel and weak demand are
causing disappointing results, we remain confident in the long term prospects for
UPS. The company is healthy financially, DHL is retreating from the US
market, and FDX is struggling to defend their Ind. Contractor model. In addition,
the Intl business continues to grow and our Supply Chain and Freight unit is
starting to show real progress. All in all, I think that the market is
overreacting and that UPS is undervalued today . As a fellow deep investor in the
company, I am happy to have most of my "eggs" in this solid basket.
As to our buyback activity, we did commit in January to buying back $10
Billion of UPS stock over the course of '08 and '09 as part of our new financial
leverage policy. As of the end of Q1 we had bought back $1.25B of stock -
pretty much right on the average pace needed to get done in our timeframe. Due to
the large quantity that we are buying, we intend to be relatively consistent
buyers of the stock on an ongoing basis and are in the market on a frequent
basis. We also intend to be somewhat opportunistic and do have the ability to
buy more shares on those days that the stock is weak and the market puts UPS
shares "on sale". You should realize however that, unlike the 1st few years
after we went public, the number of shares that UPS can buy has little impact
on the daily price behavior. The stock is now much more "liquid" and trading
volume on a busy day reaches 8-10 million shares, some 10 times the volumes
of the past.
Regards, Kurt


Kurt Kuehn
Chief Financial Officer
UPS
55 Glenlake Pkwy
Atlanta, GA 30328
404-828-6977
404-828-6619 (Fax)
 
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