By Angela Chen
United Parcel Service, Inc. warned of weak fourth-quarter
results as higher-than-expected seasonal expenses and currency
headwinds dragged down earnings.
After a disastrous 2013 holiday season, in which millions of
packages were delivered late, UPS added extra capacity to
accommodate the spike in package volume on the two peak days: Cyber
Monday and Dec. 22.
However, demand was less than expected on other days, leading to
$220 million of excess operating costs tied to contract carrier
rates and overtime and training hours.
Shares dropped 9% premarket and had risen 17% over the past 12
months through Thursday's close.
Chief Executive David Abney called the fourth-quarter results
"disappointing" and said the company plans to reduce operating
costs and implement new pricing strategies.
The ongoing West Coast port dispute, which has affected
shipments for multiple retailers, also caused problems due to
volume fluctuations.
International operating profit was also below expectations,
mostly due to unfavorable currency rates.
For the fourth quarter, the Atlanta-based shipping giant expects
earnings, excluding special items, of $1.25 a share, well below the
$1.47 that analysts polled by Thomson Reuters had predicted.
For the full year, earnings are expected to be $3.28 a share, or
$4.75 excluding special items. Earlier, the company had predicted a
profit of $4.90 to $5 a share.
For the current year, the company expects earnings growth to be
less than its previously announced target of 9% to 13%, due to
declining interest rates, dropping fuel prices, increased pension
expense of $180 million and currency headwinds.
Write to Angela Chen at angela.chen@dowjones.com
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