UPS Lowers Financial Expectations
Trucking and parcel delivery giant UPS on Friday announced it expects fourth quarter 2014 earnings to be lower that earlier forecast.
It anticipates adjusted diluted earnings per share of approximately $1.25. “While package volume and revenue results were in line with expectations, operating profit was negatively impacted by higher than expected peak-related expenses,” the Georgia-based company said in a statement.
UPS expects full-year 2014 adjusted diluted earnings per share to be $4.75, up 3.9% over 2013 of $4.57 per share.
"Clearly, our financial performance during the quarter was disappointing," said David Abney, CEO. "UPS invested heavily to ensure we would provide excellent service during peak when deliveries more than double. Though customers enjoyed high quality service, it came at a cost to UPS. Going forward, we will reduce operating costs and implement new pricing strategies during peak season."
According to UPS, peak plans were designed to provide high quality service for volume surges. The extra capacity was necessary to process the extreme spike in package volume on “Cyber Monday” and peak day on Dec. 22. However, it said demand was less than expected on other days, resulting in a less-than-optimized network during peak season.
"The rapid expansion of e-commerce has created a complex operating environment during peak season," said Kurt Kuehn, UPS chief financial officer. "UPS is in the early stages of a multi-year initiative to adapt our operations to these market challenges. We are making progress, but this quarter reflects that more work needs to be done."
UPS said it expects solid business growth across all segments in 2015. However, it cautioned increased pension expenses and currency headwinds will negatively impact results.
The company now anticipates 2015 diluted earnings per share growth to be slightly less than its long-term target of 9% to 13%.
More details will be available when the company releases earnings on Feb. 3.