UPS Warns of Disappointing Results

By Angela Chen 

United Parcel Service, Inc. warned of disappointing fourth-quarter and full-year results, as higher-than-expected seasonal expenses and currency headwinds dragged down earnings.

Chief Executive David Abney called the fourth-quarter results "disappointing" and said the company plans to reduce operating costs and implement new pricing strategies.

For the fourth quarter, the Atlanta-based shipping giant expects earnings, excluding special items, of $1.25 a share, well below the $1.47 that analysts polled by Thomson Reuters had predicted.

For the full year, earnings are expected to be $3.28 a share, or $4.75 excluding special items.

Earlier, the company had predicted full-year profit of $4.90 to $5 a share.

After a disastrous 2013 holiday season, in which millions of packages were delivered late, UPS added extra capacity to accommodate the spike in package volume on the two peak days: Cyber Monday and December 22. However, demand was less than expected on other days. This resulted in a decline in productivity, increased contract carrier rates and costs associated with overtime and training hours contributed to the excess cost.

The ongoing West Coast port dispute, which has affected shipments for multiple retailers, also caused problems due to volume fluctuations.

International operating profit was also below expectations, mostly due to unfavorable currency rates.

For the current year, the company expects earnings growth to be less than its previously announced target of 9% to 13%, due to increased pension expense and currency

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