UPS forecasts lower full-year earnings due to higher costs of holiday deliveries

UPS Inc., the nation's largest transportation company, said today it will report lower-than-expected 2013 earnings due mostly to higher fourth-quarter costs associated with the unexpected surge in traffic close to the Christmas holiday.

Atlanta-based UPS, which previously forecast "diluted" earnings of between $4.65 and $4.85 per share for the year, said full-year diluted earnings are likely to come in at $4.57 a share. A diluted earnings per-share calculation is considered a "worst case" scenario that reflects the issuance of stock for all outstanding options, warrants, and convertible securities that would reduce earnings per share.

The announcement shed light on the company's challenges in meeting delivery commitments amid the shortest holiday shipping season in 11 years and a rush of online orders during the final two to three days before Christmas. On Dec. 23, UPS delivered more than 31 million packages, the most ever in one day and 13 percent more than the prior-year peak day. The 2013 peak day delivery volume was 7.5 percent higher than planned, UPS said. To cope with the crush, UPS said it hired 85,000 temporary seasonal employees, 30,000 more than planned.

UPS' fourth-quarter results were also impacted by a severe ice storm in early December that virtually paralyzed the critical Dallas-Fort Worth region. The storm forced UPS drivers en route with packages to pull off the road for several days. In addition, once the weather cleared some drivers were constrained by federal hours-of-service driver regulations and had to remain idle. Many local businesses were closed due to the storm, requiring UPS to return packages to local distribution points for subsequent re-deliveries. The company also dealt with intermittent power outages as ice-coated tree limbs fell on power lines.

UPS said in today's statement that it expects 2014 diluted earnings per share to grow by 10 to 15 percent, in line with its long-term targets. The company will release its 2013 results on Jan. 30.