UPS Sees 2014 Profit at Low End of View as Storms Add Costs

Apr 24, 2014 4:14 pm ET

(Updates with closing share price in fifth paragraph.)

April 24 (Bloomberg) -- United Parcel Service Inc., the world’s biggest package shipping company, said its forecast for profit this year would be at the low end of its projection as harsh winter weather forced costs higher.

Profit fell 12 percent to $911 million or 98 cents a share. That fell short of the $1.08 average from 26 analyst estimates compiled by Bloomberg. The Atlanta-based company said profit this year would be at the low end of its range of $5.05 to $5.30 a share. Analysts projected profit of $5.19.

Winter storms that extended from January into March wreaked havoc across the transportation industry. At UPS, the unseasonably harsh weather caused operating profit to be trimmed by $200 million, it said in a statement today. UPS lost revenue and paid extra costs as its delivery networks were disrupted on more than half of the operating days during the quarter.

“The momentum of the underlying business was masked by the disruption of inclement weather,” Chief Financial Officer Kurt Kuehn said.

UPS fell 0.6 percent to $98.64 at 4 p.m. in New York. The stock declined 6.1 percent this year, compared with a gain of 1.6 percent in the Standard & Poor’s 500 Index.

The impact from the weather “was more than we thought, but candidly, it’s much ado about nothing,” said Benjamin Hartford, an analyst at Robert W. Baird & Co.

Economic Bellwether

UPS is viewed as an economic bellwether because of the variety of goods, from financial documents to electronics and appliances, that it delivers around the globe.

UPS handled an average 4.2 percent more packages in the U.S. during the quarter as consumers stuck at home during storms shopped online. Revenue from each of those shipments declined 1.5 percent as more online retailers opted to use cheaper, slower methods for getting goods to customers.

Operating profit from the U.S. domestic package segment fell 15 percent to $927 million, in part as overtime, purchased transportation and snow removal costs increased in the storms. Total revenue for U.S. packages rose 2.6 percent to $8.5 billion.

UPS’s international package business saw revenue increase 5 percent to $3.13 billion as volume was boosted 7.9% on increased demand in Europe.

UPS reported total revenue climbed 2.6 percent to $13.8 billion.

The company is spending more than $100 million to boost efficiency at sorting centers and accelerate the distribution of new technology to better plan drivers’ routes after an unexpected late surge in online Christmas shopping caused missed deliveries and boosted costs at the end of 2013.

--With assistance from Michael Sasso in Atlanta.