Major freight forwarding carrier
United Parcel Services Inc.
) announced that a compressed peak season, a boom in online
shopping and unfavourable December weather are going to hurt its
fourth quarter 2013 profits.
The company's fourth quarter preliminary results point to
diluted earnings per share (EPS) of $1.25, which is way below the
Zacks Consensus Estimate of $1.42.
For full-year 2013, the company expects adjusted diluted EPS
of $4.57, lower than $4.65-$4.85 guided in July 2013. The
forecast is also way below Zacks Consensus Estimate of $4.75.
United Parcel will report its earnings on Jan 30, before market
A late Thanksgiving Day cut short the holiday shopping season.
Then the last-minute online shopping surge just before Christmas
created a menace for the company. The express carrier hired
85,000 temporary employees, 30,000 more than planned, to maintain
service standards and commitments. What followed was a snowball
effect that ended up in higher costs.
The Atlanta-based company also cited a harsh weather with
heavy snowfall as the primary reason for the disappointing fourth
However, on Dec 23, United Parcel delivered 31 million
packages, which was 13% more than last year's peak day and 7.5%
ahead of its expectation. Additionally, the company is optimistic
about 2014 and expects a 10-15% surge in diluted earnings, which
is in tune with its long-term target.
The online shopping craze and recent rate hikes within the
U.S., Canada, and Puerto Rico and among these markets are
expected to benefit the company's 2014 results. Thus despite a
weak guidance for the full year, these positives hold the stock
from a major slide. It declined a mere 0.6% on Friday's trade on
We also see reflections of a sluggish worldwide economic
condition in the reduced earnings guidance for 2013. However,
World Bank's recent global GDP forecast of 3.2% bodes well for
the company as the success of logistics companies depends upon
worldwide economic development.
United Parcel carries a Zacks Rank #4 (Sell). Better-ranked
stocks within the same sector include
Pacer International Inc.
Grupo Aeroportuario del Pacifico S.A.B. de CV
Student Transport Inc.
). All the stocks currently carry a Zacks Rank #2 (Buy).
GRUPO AEROP-PAC (PAC): Free Stock Analysis
PACER INTL INC (PACR): Free Stock Analysis
STUDENT TRANSPT (STB): Free Stock Analysis
UTD PARCEL SRVC (UPS): Free Stock Analysis
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