UPS Sees 2Q Domestic Volumes Down 4%-6%

United Parcel Service Inc. (UPS) said it expects average daily domestic package volume to be down about 4% to 6% in the second quarter, potentially exceeding a 4.3% first-quarter slide.

"The second quarter will be a bit more challenging than the first," Chief Financial Officer Kurt Kuehn told analysts on a post-earnings conference call.

Kuehn also said a trend toward lighter package weights, which reduces per-package revenue, likely will continue as customers attempt to cut costs amid the economic downturn.

UPS said it expects second-quarter earnings of 45 cents to 55 cents a share. The forecast is below Wall Street's consensus view of 65 cents a share, according to Thomson Reuters.

Still, Chief Executive Scott Davis said he's hopeful the economy "will hit bottom later this year" and then begin a recovery. The company also said steeply reduced inventories could boost package weights later this year as companies opt to restock.

Meanwhile, the company said it has a strong balance sheet, with first-quarter free cash flow up $200 million at $1.9 billion. UPS noted that it will prioritize its dividend over additional share buybacks as a use of cash this year.

-By Bob Sechler; Dow Jones Newswires; 512-394-0285; [e-mail]