UPS posted a quarterly loss caused by a pension charge and gave a full-year profit forecast below analysts expectations, helping push its shares down nearly 7%.
UPS has been struggling to figure out how to lower ecommerce-related costs. UPS and FedEx have raised package rates by between 4.9% and 5.9% annually since 2009.
Delivering packages to residential addresses costs more than businesses because businesses received more packages per stop than individual consumers.
UPS said Q4 shipments to residential addresses from business rose 11.5% and 63% of deliveries in December 2016 were to homes. But while revenue at UPS flagship US domestic package business rose 6.3%, revenue per package fell 6.1%.
The company would increase its capital expenditures to around USD 4 billion in 2017 from USD 3 billion in 2017, further boosting automation and technology to handle ecommerce packages.
The package delivery company reported a Q4 net loss of USD 239 million, or 27 cents per share, compared with a net profit of USD 1.33 billion, or USD 1.48 per share, in 2016.
Excluding the non-cash, after-tax pension charge of USD 1.90 per share, UPS reported earnings per share of USD 1.63. Analysts expected USD 1.69.
The charge is related to the companys defined benefit pension programmes for employees. When UPS finds that its long-term obligations for the pensions are not fully funded, it sets aside extra cash to cover the shortfall.
UPS expects full-year 2017 EPS in a range of USD 5.80 to USD 6.10, adding that the strong US dollar should lower adjusted EPS by 30 cents.
Analysts have predicted earnings per share of USD 6.17 in 2017. Revenue in the quarter rose to USD 16.93 billion from USD 16.05 billion in 2016.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now