Shipper Experiences Lower Earnings During 2014 Holiday Season

Shipper experiences lower earnings

Last week, UPS released a warning about its fourth quarter results that reduced adjusted earnings below expectations. The unexpectedly lower estimate shocked investors, sending the stock down nearly 10 percent in Friday’s trading session.

UPS attributed the cause for the decrease to higher than expected peak-season expenses as well as a West Coast port dispute. In 2013, the company experienced shipping difficulties during the holiday season and sought to avoid a similar situation in 2014 by spending approximately $500 million on network upgrades. While the upgrades allowed UPS customers to enjoy higher quality service, the expenditure adversely impacted operating costs. The company also experienced less than expected volume during most of the 2014 holiday season, though the increased network capacity did assist with handling the significant Cyber Monday and Dec. 22 spike in demand.

For the 2015 holiday season, Chief Executive Officer David Abney stated in a Jan. 23 release that the company “will reduce operating costs and implement new pricing strategies during peak season.”

Given this information, customers of the firm could potentially see a temporary price increase for peak delivery days during the holiday season in 2015 to avoid a repeat of 2014’s financial performance.

Shipper Warns of Reduced Profit Expectations

Shipper warns of reduced profits

On July 12, international shipper UPS warned that its second quarter earnings would fall short of expectations.

Citing overcapacity in air freight, an increasing consumer demand for low-yielding shipping solutions, and a slowing U.S. industrial economy, UPS alerted investors of its reduced revenue and operating profit for the remainder of the year.

While downward revisions to economic forecasts will cause slower than anticipated earnings growth through the end of the year, UPS still anticipates a 3-7 percent increase in earnings per share over last year’s results.

UPS is expected to release its full second quarter financial results on July 23.

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