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UPS posts 4Q profit of $1.2B after lowering expectations due to snarled holiday deliveries

ATLANTA - UPS earned $1.2 billion in the fourth-quarter but a last-minute surge in holiday shipments drove up costs and hurt results.

United Parcel Service Co. on Thursday reported net income $1.25 per share in the final three months of 2013, compared with adjusted profit of $1.32 per share a year earlier. Revenue rose 2.8 per cent to $14.9 billion, short of Wall Street's forecast of $15.2 billion.

The company announced two weeks ago that earnings would fall short of expectations because of higher costs to handle a crush of holiday shipments that crested several days later than the company expected. UPS had to hire an extra 30,000 seasonal workers to handle the rush. It says bad weather in December was also a factor.

For all of 2013, UPS earned $4.37 billion, or $4.61 per share. Adjusted for special items, UPS earned $4.57 per shares, compared with $4.53 per share in 2012.

The company said that it expects full-year 2014 adjusted earnings between $5.05 and $5.30 per share. The 11 per cent to 16 per cent increase over 2013 adjusted earnings is in line with UPS' long-term growth target of 10 per cent to 15 per cent. Analysts forecast earnings of $5.29 per share.

UPS was undone in December by a big increase in online shopping and a crush of last-minute orders by shoppers who jumped on offers of free shipping until the final days before Christmas. An unusually late Thanksgiving added to UPS' challenge by shrinking the traditional shopping-and-shipping season by several days.

"The increased volume put a strain on our network, causing delays. In response, UPS deployed additional people and equipment, placing a greater emphasis on service than cost," said UPS CEO Scott Davis, in a statement.

The peak delivery day, Dec. 23, brought more than 31 million packages — a 13 per cent increase over 2012's busiest day and 7.5 per cent more than UPS expected.

UPS had planned to hire 55,000 seasonal workers, the same as in 2012, but had to add another 30,000, a significant unexpected cost.

Analysts expect that for next holiday season, UPS will make changes including higher charges for last-minute deliveries to avoid the same kind of last-minute crush.

UPS shares rose $1.40 to $96.73 in morning trading.



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