UPS Has Loss on Pension; Overseas Gains Buoy Results
By Mary Jane Credeur
Jan. 30 (Bloomberg) -- United Parcel Service Inc., the world's largest package-delivery company, reported a $2.58 billion fourth-quarter loss on costs to exit a pension plan. Overseas gains helped counter slower growth in the U.S.
The net loss was $2.46 a share, Atlanta-based UPS said today. Profit a year earlier was $1.13 billion, or $1.04 a share. Excluding the pension payment, earnings met the $1.13-a- share average of 15 analyst estimates compiled by Bloomberg.
International markets including China buoyed results as U.S. package volume rose 1.4 percent, the smallest fourth- quarter gain since 2004. The U.S. economy weakened more than forecast last quarter as consumer spending cooled and the housing recession deepened, the government said today.
``Economic uncertainty'' in the U.S. will make 2008 a ``challenging'' year, Chief Executive Officer Scott Davis told analysts on a conference call.
Full-year earnings will be $4.30 to $4.50 a share, UPS said. The forecast was ``as we expected,'' Bear Stearns & Co. analyst Edward Wolfe in New York said in a note to investors.
The average estimate of 15 analysts surveyed by Bloomberg was $4.45.
UPS rose 50 cents to $71.42 at 9:54 a.m. in New York Stock Exchange composite trading. The shares dropped 5.7 percent last year, the third straight annual decline.
`Difficult' First Quarter
Fourth-quarter revenue increased 6.1 percent to $13.4 billion, UPS said.
Chief Financial Officer Kurt Kuehn said in a statement that the first quarter will be the year's ``most difficult,'' citing the Easter holiday in March and additional interest expense for a new Teamsters contract that includes the pension shift. Easter often falls in the second quarter.
The U.S. small-package market will grow about 1 percent to 2 percent in 2008, matching gains in the gross domestic product, Davis said on the conference call. 
``Just-in-time, direct-to-consumer purchasing are not going away, and that's going to benefit small package,'' Davis said. ``We do not expect the small package to lag the economy for 2008.''
In the international-package segment, sales jumped 17 percent, UPS said. The company is expanding operations overseas, where sales are growing faster than in the U.S., and now gets about one-fifth of its revenue from international markets.
``We expect the company's international package business to buoy results,'' Art Hatfield, a Memphis, Tennessee-based analyst at Morgan Keegan Inc., wrote in a Jan. 15 note to clients.
UPS's pension expense stems from $6.1 billion in costs to withdraw from a multiemployer retirement plan after the company agreed to a new contract with the Teamsters union last quarter. That cost was partially offset by a reduction in income tax.
The labor accord, which covers about 42,000 Teamsters members at UPS, will help in managing pension obligations, UPS said.
photo:readerschallenge.com
source:bloomberg.com
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