UPS Forecast Weaker Than Expected, Shares Slide

UPS Forecast Weaker Than Expected, Shares Slide

United Parcel Service Inc reported fourth-quarter earnings below analysts’ estimates on Thursday and forecast weaker-than-expected profit for 2013, sending its shares lower.

UPS, the world’s largest package-delivery company, said it expects earnings to rise six per cent to 12 per cent in 2013, to $4.80 to $5.06 per share, which is below the average Wall Street target of $5.11, according to Reuters.

“Despite modest macro growth expectations for 2013 and uncertainty in the US caused by the lack of progress in Washington, the UPS business model will deliver consistent results,” Chief Executive, Scott Davis, said in a statement.

UPS’ largest US rival, FedEx Corp has been struggling with falling profits as customers increasingly send goods by ground, a less costly and less profitable mode of transport than air.

Because of the huge volume of packages they handle each day, UPS and FedEx are viewed as barometers of economic activity. UPS’ profit decline came in a quarter when the US economy contracted by 0.1 per cent, as per a government report on Wednesday that surprised economists.

The company posted a fourth-quarter net loss of $1.75bn, or $1.83 per share, after a $3bn noncash charge for pension obligations. In the year-earlier period, it earned $725m, or 74 cents per share.

Factoring out one-time, noncash items, the profit came to $1.32 per share, below the analysts’ average estimate of $1.38, according to Thomson Reuters.

Revenue rose 2.9 per cent to $14.57bn from $14.17bn.

UPS shares fell two per cent to $79.65 in premarket trading. Earlier this month, UPS dropped its $7bn bid for Dutch delivery firm TNT Express after European regulators said they would veto the deal, citing antitrust concerns.

UPS, which had sought to expand quickly in Europe, will now likely have to grow on the continent on its own, rather than potentially run afoul of the European Commission again.

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