UPS stock tumbles amid profit concerns

Decline nearly wipes out surge in value seen since Nov. election.

UPS shares tumbled Tuesday after the shipping giant reported a loss from a $2 billion-plus pension charge and issued a downbeat outlook.

The nearly 7 percent decline in UPS’ shares, which lost $7.90 to close at $109.13, nearly wiped out a surge in value since the November election raised investors’ hopes that President Donald Trump’s policies will boost economic growth.

Sandy Springs-based UPS said revenue in the fourth quarter rose more than 5 percent, to $16.9 billion, thanks to strong holiday shipping volumes. UPS said it delivered 1.4 billion packages during the quarter, 7 percent more than a year ago.

CEO David Abney said the company’s international business “delivered another extraordinary performance, while the U.S. managed through considerable changes in product mix.”

But in a report, Cowen & Co. analysts said UPS’ growing reliance on business-to-consumer shipments from online shopping resulted in disappointing financial results.

Revenue and profit margins were lower than expected, the analysts said, because of lower prices on U.S. shipments. The Cowen analysts noted that profit margins on domestic shipments were 12.3 percent during the quarter, well below the consensus forecast of 13.7 percent.

“This weakness in the segment will likely lead to continued questions about growth of Amazon’s delivery network and how UPS will continue to drive growth in a weak industrial environment,” the analysts said.

UPS posted a $239 million loss for the quarter thanks to nearly $2.7 billion, before taxes, related to pension costs for its U.S. and overseas workers. The non-cash charge was due partly to lower-than projected investment returns for pension funds, and could point to the need to pump cash into the plans in the future.

Without the pension costs, UPS said its fourth-quarter “adjusted” profit was $1.43 billion, slightly higher than a year earlier.

The company projected pershare earnings for this year below analyst expectations, citing “headwinds” including a strong U.S. dollar, which makes overseas profits smaller in dollar terms.