updated 4/23/2009 11:14:12 AM ET 2009-04-23T15:14:12

UPS Inc.’s first-quarter profit plunged as fewer people sent packages and used premium services like next-day air amid the global financial crisis. The world’s largest shipping carrier also gave a disappointing second-quarter outlook on Thursday, and disclosed it shed 10,000 domestic jobs during the first three months of the year.

UPS earnings in the January-March period fell more than 55 percent to $401 million as revenue dropped more than 13 percent, compared to profit of $906 million a year ago.

The results missed Wall Street expectations, and UPS provided an outlook for second-quarter earnings that was below analysts expectations. UPS shares fell.

“Clearly, these are extraordinary times,” Chief Financial Officer Kurt Kuehn told analysts in a conference call.

The first-quarter profit was 40 cents a share, compared to year-ago earnings of 87 cents a share.

Revenue in the quarter was $10.94 billion, versus $12.68 billion a year ago.

Adjusted earnings were 52 cents a share. Analysts polled by Thomson Reuters, on average, expected UPS to earn 56 cents per share on revenue of $11.4 billion for the first quarter. Analysts generally exclude one-time items from their estimates.

Rival FedEx Corp. also has been facing financial headwinds from the weak economy. In March, the Memphis, Tenn.-based company said it would cut more jobs and trim wages again, after reporting its fiscal third-quarter profit tumbled 75 percent on sliding revenue. Earlier this month, FedEx said it would permanently remove 14 jets from service as part of an overall plan to reduce capacity.

Economists and analysts consider FedEx and UPS to be bellwethers of the global economy, since they deal with such basic indicators of company health as orders and product shipments.

For the three months ended March 31, UPS’ consolidated average daily volume totaled 14.5 million packages, a 3.9 percent decline compared to a year ago. Average revenue per piece decreased 6.9 percent, reflecting changes in product mix, declining fuel surcharges and weight per package and the negative impact of currency.

The company’s international segment was affected in the quarter as well, posting a 1 percent volume decline with some benefit from the timing of Easter. Some customers, especially in Europe, take Good Friday and the Monday following Easter off, which lowers UPS’ overall growth, the company said. The holiday fell this year in April, which is in the second quarter.

UPS said that the second quarter will be difficult. The company expects earnings per share in a range of 45 cents to 55 cents. Analysts were expecting second-quarter earnings of 65 cents. Kuehn said the company’s U.S. domestic package volumes is expected to decline 4 percent to 6 percent in the April-June quarter.

Kuehn said economic indicators suggest recovery in the U.S. might begin late this year, but more likely not until 2010.

He disclosed that UPS cut 10,000 domestic jobs in the first quarter through attrition and part-time employees leaving and not being replaced.

Earlier this month, UPS said that talks with DHL about carrying some of its air packages had ended, scuttling a venture that originally was expected to generate up to $1 billion in annual revenue for UPS.

Analysts expected the deal to fall through after DHL decided that it would no longer offer U.S. domestic-only air and ground services.

Although it had said its international shipping to and from the U.S. would continue, the cutbacks in its U.S. operations meant that any deal with UPS would have been greatly scaled back.

The venture as originally envisioned was expected to last up to 10 years.

When the talks were announced last May, DHL said it expected to finalize a contract by the end of 2008. However, in November DHL, hit by heavy losses and fierce competition, said that as of Jan. 30 it would significantly reduce its air and ground operations in the U.S. It also said it would cut 9,500 American jobs.

UPS executives said Thursday that despite the deal falling through, UPS has been able to pick up some former domestic customers of DHL.

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