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UPS warns on 1Q
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January 29, 2002: 1:03 p.m. ET
No. 1 transportation company's lower fourth-quarter profit tops forecasts.
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NEW YORK (CNN/Money) - United Parcel Service posted a lower fourth-quarter profit, topping Wall Street's most optimistic expectations, but the stock fell due to a warning that first-quarter results would fall short of forecasts due to the continued effects of the U.S. recession.
The world's largest transportation company earned net income of $645 million, or 57 cents a share, down from earnings of $724 million, or 63 cents a share, a year earlier. Analysts surveyed by earnings tracker First Call gave a consensus earnings-per-share forecast of 50 cents, with estimates ranging from 46 cents to 55 cents, which was about the same as the company's guidance for the quarter that it gave at the time it released third-quarter results.
But the Atlanta-based company warned it now expects first-quarter earnings of 40 cents-to-47 cents a share, which is below First Call's consensus EPS forecast of 48 cents and at the lower end of the range of estimates between 54 cents and 40 cents in the period. The warning sent UPS (UPS: down $1.10 to $56.00, Research, Estimates) shares were down about 3 percent early Tuesday.
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UPS CFO Scott Davis discusses fourth-quarter results.
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The warning is just the latest in a series of lowered guidance from the company during the past 13 months, as it struggled to deal with the drop in shipments due to the slowing of the U.S. economy. The company's most recent warning came in September in the wake of the terrorist attacks, when it lowered third-quarter earnings guidance.
While the company did not give any fourth-quarter guidance at that time, analysts began cutting their fourth-quarter forecasts from a consensus estimate of 56 cents a share. By the time the company gave its lower fourth-quarter guidance three weeks later the First Call forecast stood at 52 cents a share.
Fourth-quarter revenue edged up 2 percent to $8.0 billion from $7.9 billion a year earlier, putting it just ahead of First Call's forecast. But the company's core U.S. package business saw revenue fall about 2 percent, as it was a gain in international and non-package revenue which lifted the company's sales. The number of domestic shipments handled by UPS fell across all its various classes of service.
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The company said cost-cutting efforts in the quarter helped it deal with the slowdown in business. Still, the ratio of operating expenses to revenue, a key measure of a freight carrier's financial performance, worsened for its U.S. operations during the quarter to 85.3 percent from 84.4 percent a year earlier. 
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