United Parcel Service Inc. (UPS), the world’s largest package-delivery company, forecast profit for this year that trailed analysts’ estimates as a weak global economy weighs on shipping.
Earnings per share will be $4.80 to $5.06, the Atlanta- based company said today in a statement. Analysts projected $5.13, the average of 25 estimates in a Bloomberg survey.
UPS’s growth is constrained by a sluggish worldwide economy and disputes over the U.S. debt ceiling that erode shipping demand and confidence, Chief Executive Officer Scott Davis said. Investors and analysts use the company as an economic gauge because it handles goods as varied as auto parts and pharmaceuticals.
“This guidance is obviously going to be seen as a negative,” Kevin Sterling, a BB&T Corp. analyst in Richmond, Virginia, with a buy rating on the shares, said in a telephone interview. “A lot of people look to UPS as a bellwether of the economy and what are they saying? Well, maybe things aren’t as good as we initially thought.”
UPS fell 2.4 percent to $79.29 at the close in New York, the biggest decline since Sept. 5. The shares have climbed 7.5 percent this year, outpacing a 5 percent gain by the Standard & Poor’s 500 Index.
Profit excluding certain items for the three months ended in December was $1.32 a share, compared with a $1.38 average estimate. The results were curbed by 6 cents for costs from superstorm Sandy and expenses from the company’s pursuit of TNT Express NV. (TNTE)
UPS is focusing on its own operations after terminating an agreement to buy TNT for 5.16 billion euros ($6.9 billion). The European Commission blocked the accord, which would have doubled UPS’s footprint in Europe and been the largest acquisition since the company was founded as a bicycle messenger service in 1907.
UPS must pay TNT a 200 million-euro breakup fee. The deal was the biggest to fail in Europe since BAE Systems Plc and European Aeronautic, Defence & Space Co. called off a merger in October.
“It would be an understatement to say we’re disappointed,” Davis said on a conference call with analysts and investors. “We are moving on.”
UPS will look for new ways to grow in Europe with priorities being international packages and forwarding and distribution, particularly in health care, Davis said.
“Our typical approach is to have organic growth supplemented with small and medium-sized acquisitions, so we’ll get right back on track with that,” Chief Financial Officer Kurt Kuehn said in a telephone interview.
“Clearly there are a number of potential ways to grow that we’ve looked at through acquisition or internal development, and those are now back into active gear,” he said. “I wouldn’t be surprised to see us once again do acquisitions that bring new capabilities to us.”
Fourth-quarter revenue rose 2.9 percent to $14.6 billion, topping the $14.4 billion estimated by analysts.
Including a $3 billion after-tax charge for pension and retirement benefits, UPS posted a quarterly net loss of $1.75 billion, or $1.83 a share, compared with a year-earlier profit of $725 million, or 74 cents.
UPS also said it would increase 2013 share repurchases to as much as $4 billion, from a projection of $1.5 billion previously.
Free cash flow of $5.4 billion in 2012 allowed for “significant distributions to shareholders,” Kuehn said.
UPS’s board will review the dividend policy when it meets in a few weeks, Davis said on the call.
The company may increase its dividend 8.8 percent to 62 cents a share in February, from 57 cents previously, according to a Bloomberg forecast.
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