DALLAS — United Parcel Service Inc., the world’s biggest package-delivery company, said weak global trade and a disappointing Christmas-shopping season slowed it down in the fourth quarter.
Profit in the last three months of 2012 fell short of Wall Street expectations. So did UPS’ outlook for this year as the company took a cautious approach toward the global economy.
UPS also forecast a “relatively flat” first quarter. Shares dropped 2 percent.
“Overall we still see 2013 as a slow-growth economy,” Chairman and Chief Executive Officer D. Scott Davis said Thursday on a conference call with analysts.
Davis said Europe was more stable than a year ago, and “in the U.S., I think we got off to a strong start in January.” But, he said, “we’re not banking on a robust economy.”
UPS’ growth is constrained by a sluggish worldwide economy and disputes over the U.S. debt ceiling that erode shipping demand and confidence, 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,” said Kevin Sterling, a BB&T Corp. analyst in Richmond, Va. “A lot of people look to UPS as a bell-wether of the economy and what are they saying? Well, maybe things aren’t as good as we initially thought.”
The company said that disruptions from superstorm Sandy lowered earnings by 5 cents per share and money spent on the failed pursuit of Dutch delivery firm TNT Express NV cost another penny per share.
UPS increased its plan for spending on buying back its own stock this year to $4 billion from $1.5 billion.
The Atlanta-based company said it expects 2013 adjusted earnings of between $4.80 and $5.06 per share.That would be an increase of 6 percent to 12 percent over 2012 but less than the $5.13 per share that analysts expected. UPS said the first quarter would be fairly flat, hurt by one less business day than in 2012.
UPS said it lost $1.75 billion in the fourth quarter because of a $3 billion charge for pension liabilities, compared with a profit of $725 million a year earlier. Without the pension-accounting charge, UPS said that it would have earned $2.05 billion, or $1.32 per share.
Analysts expected adjusted earnings of $1.38 per share, according to FactSet.
Revenue rose 3 percent to $14.57 billion, beating analysts’ forecast of $14.48 billion.
Peter Nesvold, an analyst for Jefferies & Co., said investors expected the company to make a “substantial” increase in share repurchasing after the TNT deal fell apart and freed up cash.
Standard & Poor’s analyst Jim Corridore said the stock buybacks would help protect UPS shares from falling.
UPS said consumer spending on Christmas shopping was less than expected, although it still carried a record 500 million packages, including nearly 28 million on the busiest day, Dec. 19.
In January, UPS walked away from an agreement to buy TNT. It would have expanded UPS’ presence in Europe, but antitrust regulators there insisted on concessions that UPS considered too costly. Davis said Thursday that the company is still interested in acquisitions but probably nothing as big as TNT, which would have been UPS’ largest purchase ever.
UPS’ aborted takeover bid for TNT Express was formally blocked Wednesday by European Union regulators because UPS failed to find a suitable buyer for parts of TNT to ensure competition for delivery services wouldn’t be crushed.
UPS’ inability to sign a binding deal with a potential purchaser of TNT units in 17 countries led regulators to conclude that its divestment plan was insufficient, the European Union’s antitrust chief said.
Shares fell $1.94, or 2.4 percent, to close Thursday at $79.29. That pushed the gain for the month of January back below 10 percent.
Information for this article was contributed by Aoife White and Mary Jane Credeur of Bloomberg News.
Business, Pages 29 on 02/01/2013