Costs of Strong Demand Cut Into UPS Earnings

For the full year, UPS posted EPS of $4.61 on revenues of $55.43 billion, compared with consensus estimates calling for EPS of $4.57 on revenues of $55.68 billion. Revenues rose more than $1 billion year-over-year and EPS was up by 1.7%.

The company’s CEO said:

As the retail market shifts to a direct-to-consumer model, more and more companies are leveraging UPS solutions. As a result, we experienced an unprecedented increase in volume, exceeding even our most optimistic plans. The increased volume put a strain on our network, causing delays. In response, UPS deployed additional people and equipment, placing a greater emphasis on service than cost. UPS will make the necessary investments and operational improvements to ensure we meet the needs of the marketplace.

UPS said it delivered 20 million packages per day during the fourth quarter. Total shipments in 2013 increased to 4.3 billion, a 3.9% gain over 2012.

The company expects full-year diluted earnings per share to be within a range of $5.05 to $5.30, an increase of up to 16% over 2013 adjusted results. Consensus forecasts so far call for EPS of $0.76 and revenue of $14.80 billion in the current quarter, as well as $5.31 per share and $58.55 billion for the full year.

UPS shares were inactive in premarket trading, after closing at $95.18 in a 52-week range of $79.00 to $105.37. Thomson Reuters had a consensus analyst price target of around $110.17 before the report.

Shares of rival FedEx Corp. (NYSE: FDX) also were inactive in premarket trading. FedEx next reports in March, and the consensus forecast so far has EPS up 21% and revenue up less than 5% for the current quarter.