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UPS Woes Partly a Worry for FedEx, Amazon Plays Its Role

The holiday season brought little joy to United Parcel Service Inc. (NYSE: UPS). The package shipping company warned Friday that huge demand for late holiday shipping will cut fourth-quarter earnings below Wall Street estimates.

Shares were off about $1.58, or 1.6%, to $98.91 early in early trading. They had fallen as much as 4% in premarket trading. Rival FedEx Corp. (NYSE: FDX) also was hit by the UPS announcement. Shares were off $0.72 to $141.09

UPS expects earnings of $1.25 a share when it reports results on Jan. 30; Wall Street had expected $1.43. For 2013, the company expects earnings of $4.57 a share. That is down from earlier guidance of $4.65 to $4.85 and down from the Street estimate of $4.75.

The company said its domestic results were hit “by the challenges of the compressed peak season coupled with an unprecedented level of online shopping that included a surge of last-minute orders.” Bad weather also was a problem. FedEx cited similar problems.

UPS delivered a record 31 million packages on Dec. 23. That beat its 2012 record by 13%and was 7.5% larger than UPS expected. But, because of the late surge, the peak came six days later than planned.

To meet the demand from shippers like Amazon.com Inc. (NASDAQ: AMZN) and others, UPS said it hired 85,000 part-time workers, 30,000 more than planned, and deployed more planes and other equipment to move the packages.

While UPS said it is “confident of its 2014 outlook,” its new guidance was lower than the consensus estimate. It expects full-year earnings will be up 10% to 15% from 2013, implying a range of $5.03 to $5.26. The Street estimate has been $5.49.

The UPS report also shows how Americans increasingly are shopping online for the holidays, while traditional stores were discounting heavily to compete. Best Buy Co. Inc. (NYSE: BBY) warned Thursday about weak holiday results, and shares fell 28.6% to $26.83. The shares were down an additional 3.8% early Friday to $25.77.

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