UPS forecast weaker than expected

REUTERS

The UPS logo is seen outside their facility in Hodgkins, Illinois December 16, 2010. The UPS Hodgkins facility is the largest ground shipping facility and will handle over 2.5 million packages today alone. REUTERS/Frank Polich (UNITED STATES - Tags: BUSINESS EMPLOYMENT)

United Parcel Service Inc reported fourth-quarter earnings below analysts' estimates on Thursday and forecast weaker-than-expected profit for 2013, sending its shares lower.

UPS, the world's largest package-delivery company, said it expects earnings to rise 6 percent to 12 percent in 2013, to $4.80 to $5.06 per share, which is below the average Wall Street target of $5.11.

“Despite modest macro growth expectations for 2013 and uncertainty in the U.S. caused by the lack of progress in Washington, the UPS business model will deliver consistent results,” Chief Executive Scott Davis said in a statement.

UPS' largest US rival, FedEx Corp has been struggling with falling profits as customers increasingly send goods by ground, a less costly and less profitable mode of transport than air.

Because of the huge volume of packages they handle each day, UPS and FedEx are viewed as barometers of economic activity. UPS' profit decline came in a quarter when the US economy contracted by 0.1 percent, as per a government report on Wednesday that surprised economists.

The company posted a fourth-quarter net loss of $1.75 billion, or $1.83 per share, after a $3 billion noncash charge for pension obligations. In the year-earlier period, it earned $725 million, or 74 cents per share.

Factoring out one-time, noncash items, the profit came to $1.32 per share, below the analysts' average estimate of $1.38, according to Thomson Reuters I/B/E/S.

Revenue rose 2.9 percent to $14.57 billion from $14.17 billion.

UPS shares fell 2 percent to $79.65 in premarket trading.

Earlier this month, UPS dropped its $7 billion bid for Dutch delivery firm TNT Express after European regulators said they would veto the deal, citing antitrust concerns.

UPS, which had sought to expand quickly in Europe, will now likely have to grow on the continent on its own, rather than potentially run afoul of the European Commission again.

At Wednesday's close, UPS shares were up about 7 percent over the past year, trailing the 14 percent rise of the Standard & Poor's 500 index. - Reuters