UPS profit miss raises stakes for 2019 holiday season; shares sink 7%
Thursday 25/April/2019 - 04:54 PM
United Parcel Service Inc on Thursday blamed harsh winter weather in the United States as it reported lower-than-expected first-quarter profit، sending shares down more than 7% percent in early trading، according to Reuters.
Despite the rough start to the year، the world’s biggest package delivery company stuck by its forecast for 2019 earnings of $7.45 to $7.75 per share. That raises the pressure for Atlanta-based UPS، which is spending billions of dollars to modernize its network، to meet its targets during this year’s key winter holiday season.
“There is pressure on management to execute at a high level during the peak،” Cowen and Co. analyst Helane Becker said in a client note.
Shares in UPS were down 7.7 percent to $105.55 in morning trading.
Operating profit in its U.S. domestic business، its biggest، dropped to $666 million in the quarter ended March 31، from $756 million a year earlier، largely due to an $80 million hit from weather-related disruptions.
Net income fell more than 17 percent to $1.1 billion، or $1.28 per share، from the year-earlier quarter، including a 7 cent per share hit from severe storms in the U.S. Northeast and Midwest.
Excluding an 11 cent per share charge related to modernizing its network، UPS earned $1.39 per share، missing analysts’ average estimate of $1.41، according to IBES data from Refinitiv.
Revenue rose 0.3 percent to $17.2 billion، but was below expectations for $17.8 billion.
UPS is working to attract more business-to-business shipments to offset lower-profit deliveries of shoppers’ online purchases from retailers like Amazon.com and Walmart Inc.
It invested nearly $7 billion in 2018 under a three-year plan to automate package-sorting hubs، make routes more efficient and to upgrade airplanes and other equipment.
That initiative includes construction of eight regional “super hubs” in the United States. UPS has already opened these more flexible facilities in Georgia، Indiana، Arizona، and Utah، and will open two more، in Texas and Washington State، this year. Edited by: Ahmad El-Assasy