UPS hits lowered target for 4Q profit, 2015 forecast tepid

AP News
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Posted: Feb 03, 2015 9:14 AM
UPS hits lowered target for 4Q profit, 2015 forecast tepid

DALLAS (AP) — Higher spending to gear up for the crush of holiday-package deliveries pushed fourth-quarter profit down 61 percent at UPS, and the company gave a tepid outlook for 2015 earnings.

The results were roughly in line with the lowered expectations that UPS set two weeks ago, when it warned that late-2014 profits would be disappointing.

CEO David Abney said the company will control costs and raise prices this year. He said UPS remained on track to hit long-term goals for increased earnings.

UPS shares fell in premarket trading Tuesday after initially moving higher.

United Parcel Service Inc. said Tuesday that it earned $453 million, or 49 cents per share, in the last three months of 2014, compared with $1.17 billion, or $1.25 per share, a year earlier.

Excluding special items, the company said it would have earned $1.25 per share in the latest quarter, which matched the average estimate of analysts surveyed by Zacks Investment Research but was 3 cents below the consensus tallied by another service, FactSet.

Revenue rose 6 percent to $15.90 billion, beating forecasts at both research firms.

Atlanta-based UPS said that 2015 earnings would be between $5.05 and $5.30 per share. The midpoint of that range fell below the $5.26 per share forecast in the FactSet survey.

UPS signaled on Jan. 23 that heavy spending to handle the holiday crush would cause earnings to fall below Wall Street's then-expectations — a move that took most of the suspense out of Tuesday's results. But the financial report gave more details about what happened.

While revenue grew 6 percent, total operating expenses jumped 16 percent, led by a 20 percent increase in compensation and benefits. That reflected the cost UPS incurred by adding 100,000 seasonal workers to deal with holiday shipments.

The extra hires were designed to avoid a repeat of 2013, when many holiday packages failed to be delivered on-time. And they appeared to be necessary — UPS volumes on the peak day in December and so-called Cyber Monday after Thanksgiving both topped forecasts. UPS delivered 8 percent more packages in the quarter than it did in the same period of 2013.

Abney said in a statement that customers were "delighted" with the holiday service, but financial results were disappointing.

"As we move into 2015, we will address this disparity with both cost and revenue actions," Abney said. He promised that the company would boost profit by improving efficiency "and adjusting price where appropriate."

Abney said the company still aimed for long-term earnings growth of 9 to 13 percent.

UPS shares fell $1.12 to $99.01 in premarket trading about 30 minutes before the market open. UPS shares have declined about 10 percent since the beginning of the year, while the Standard & Poor's 500 index has declined nearly 2 percent. The stock has climbed 5 percent in the last 12 months.

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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on WEN at http://www.zacks.com/ap/WEN

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