UPS Hits Lowered Target for 4Q Profit, 2015 Forecast Tepid

02/04/2015 15:01
Higher spending to ready to the crush of holiday-package deliveries pushed fourth-quarter profit down 61 percent at UPS as well as the company gave a tepid outlook for 2015.
The outcomes were roughly in line with the lowered expectations that UPS set 14 days ago, when it warned that profits throughout the latter perhaps the year would disappoint.
CEO David Abney said Tuesday the company will control costs and raise prices in 2010, including surcharges for residential deliveries on peak days. UPS is staying with its long-term targets for higher earnings, he said.
UPS earned $453 million, or 49 cents per share, in the last ninety days of 2014, weighed against $1.17 billion, or $1.25 per share, last year.
Excluding special items, this company might have earned $1.25 per share, which matched the normal estimate of analysts surveyed by Zacks Investment Research. However, it had been 3 cents shy with the consensus tallied by another service, FactSet.
Revenue rose 6 percent to $15.90 billion, beating forecasts at both research firms.
The Atlanta company declared 2015 earnings will be between $5.05 and $5.30 per share. The midpoint of these range falls below the $5.26 per share forecast within the FactSet survey.
UPS Inc. signaled on Jan. 23 that heavy spending to handle the mass of holiday shipping would pull earnings below Wall Street expectations. The company's report Tuesday did reveal additional information by what happened.
While revenue grew 6 percent, total operating expenses jumped 16 percent, led by the 20 percent increase in compensation and benefits. That reflected the price of adding 100,000 seasonal workers.
The corporation was striving avoiding a repeat of 2013, when it turned out overwhelmed by last-minute buying online. Many holiday packages arrived late. Abney said the company lay out earlier this winter holiday to win the trust of that customers and "protect the brand."
UPS volumes for the peak day in December therefore-called Cyber Monday after Thanksgiving both topped forecasts. UPS delivered 8 percent more packages inside the quarter than it did within the same amount of 2013.
Abney said, however, that there have been obvious cost overruns. The company thought i would operate a regular schedule your day after Thanksgiving, a large shopping day, but there weren't enough pickups and deliveries to keep drivers busy. The corporation could make changes to further improve dispatching minimizing overtime, Abney said.
There will be price increases, which is to be aimed more at consumers than at business customers. Executives said they'll impose surcharges for optimum-season residential deliveries such as the SurePost service, by which UPS usually turns during deputize delivery towards the Post Office.
Caused by falling oil prices, UPS expects less revenue from fuel surcharges. But cheaper fuel will lower a major cost. Those lower fuel costs may also stimulate consumer spending as Americans pay less at the pump, which would also help UPS, said CFO Kurt Kuehn in the interview.
Inspite of the disappointing end to 2014, the corporation still aims for long-term earnings development of 9 percent to 13 percent. Helane Becker, an analyst with Cowen & Co., said she was highly skeptical given the company's rise in the lower single digits the last couple years.
UPS shares fell 41 cents to $99.72 in midday trading. The shares began your day down ten percent for your year, weighed against a decline of nearly 2 percent inside the Standard & Poor's 500 index. The shares have climbed 7 percent during the last 12 months.