UPS sees quick return of business lost in labor talks

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Posted 10:45AM on Tuesday, July 23, 2002

ATLANTA - United Parcel Service said Tuesday that business lost during labor talks with the Teamsters will hurt third-quarter earnings, but the company expects most nervous customers to return soon. The package delivery giant and the union struck a deal last week that gives workers a 22 percent pay raise over six years and adds 10,000 jobs. UPS-employed Teamsters still must approve the agreement. The agreement came 16 days before the current five-year contract was to expire - averting a repeat of the devastating 1997 strike. UPS acknowledged Tuesday that many customers took their business elsewhere during the talks. The company said the diversion will take third-quarter earnings down 4 to 5 cents per share. The company projects earnings of 50-55 cents for the quarter, compared with the 56 cents predicted by a consensus of analysts surveyed by Thomson Financial/First Call. UPS earned 50 cents in the same quarter last year. But executives said they expect more than half of the lost volume to return quickly, with almost all of it coming back over the next few months. "Many customers diverted reluctantly," chief financial officer Scott Davis said. "A number who have returned to us have said the service and reliability that UPS offers are important to them, and they're glad they're back with us." The company also said it expects more than 13 percent growth in 2003, outperforming its average over the past decade, assuming worldwide trends continue and the American economy recovers. The guidance came on the day UPS was originally set to release its second-quarter earnings. That announcement came 11 days early, timed just ahead of UPS's inclusion in the Standard & Poor's 500 stock index. The addition forced mutual funds that track the index to buy UPS shares. The company has announced it will issue 32.5 million shares of Class B stock to meet that demand. For the April-June quarter, UPS earned $611 million, or 54 cents a share, in line with Wall Street estimates. The company earned $630 million, or 55 cents a share, in the same period last year. Results of the Teamsters' vote are expected in mid-August.