UPS disclosed on Friday morning that it expected its fourth-quarter earnings to widely miss expectations, and following this news shares of the shipping giant got slammed, closing down 9.9%.
UPS said it expected adjusted earnings per share to total $US1.25 in the fourth quarter, missing Wall Street’s expectations for earnings of $US1.47, with UPS attributing this earnings miss to “underperformance” from its US domestic segment.
“While package volume and revenue results were in line with expectations, operating profit was negatively impacted by higher-than-expected peak-related expenses,” the company said.
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, December 22. However, demand was less than expected on other days. This resulted in a sub-optimised network during peak season. A decline in productivity, increased contract carrier rates, as well as costs associated with overtime and training hours contributed to the excess cost. In addition, the network was somewhat disrupted by volume fluctuations caused by the West Coast port dispute.
In its release, UPS CEO David Abney said, “Clearly, our financial performance during the quarter was disappointing.”
The company added that a pension expense of $US180 million and currency headwinds — i.e. a strong US dollar — would negatively affect results in 2015, and the company now expects its 2015 EPS to come in below its target growth of 9% to 13%.
Read UPS’ full release here »
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