UPS Warns on Recession Risk

The carrier, which claims to move about 7% of the country's gross domestic product (GDP) per day, said the fourth quarter of 2007 would be its slowest in four years. Weak retail sales were cited. UPS will report 2007 financial results on January 30th. Meanwhile, the company took a number of steps affecting its capital structure. One move was to increase its share repurchase program from $2 billion to $10 billion. The company also made its $6.1 billion payment to withdraw from the Central States multi-employer pension fund, which could result in a net after-tax expense of $3.8 billion in the fourth quarter.

Revenue estimates for UPS remain unchanged, say analysts at Stifel Nicolaus, but the soft freight market and uncertain US economic outlook, coupled with steps the company is taking that could affect earnings through higher interest rates, lead them to lower earnings estimates for UPS for 2008 and 2009.

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