Europe worries temper companies' profit outlook

Tue Jul 24, 2012 2:43pm EDT
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By Nick Zieminski and Scott Malone

NEW YORK/BOSTON (Reuters) - Worries about a slowing global economy crimped corporate spending in the second quarter, leaving the chief executives of top U.S. companies including United Parcel Service Inc and DuPont Co more guarded on their growth prospects for the rest of the year.

UPS, along with chip maker Texas Instruments Inc and printer maker Lexmark International Inc, said it would not increase profit as quickly as expected through the rest of the year, as the corporate customers that generate most of its volume hold the line on spending.

"Economies around the world are showing signs of weakening and our customers are increasingly nervous," said Scott Davis, chief executive of the world's largest package-delivery company. "In the U.S., uncertainty stemming from this year's elections and the looming fiscal cliff, constrains the ability of businesses to make important decisions such as hiring new employees, making capital investments, and restocking inventories. This will further restrict economic growth."

UPS said it now expects profit to rise about 3 to 8 percent this year, about half its prior forecast growth rate.

AT&T Inc cited a similar murky corporate spending outlook, saying it no longer expects its business services business to return to expanding revenue this year.

Of 26 U.S. companies that have revised third-quarter profit forecasts since mid-June, 19 have cut them, with the average forecast being pulled down 2.5 percent, according to Thomson Reuters I/B/E/S.

Even companies that beat Wall Street's expectations in the second quarter -- including DuPont, Illinois Tool Works Inc and Paccar Inc -- sounded a note of caution on the next six months.

"We need to all be cautious as we look at these markets in the second half of the year," said DuPont CEO Ellen Kullman. "The expectations in Europe are very low and they're kind of bumping along the bottom in a recessionary mode."   Continued...

A trader works at the post that trades UPS and Whirlpool on the floor of the New York Stock Exchange, July 24, 2012. REUTERS/Brendan McDermid