Dallas, TX — United Parcel Service Inc. said Thursday that fourth-quarter profit fell, hurt by a hefty pension charge, but the results beat expectations as the company handled more packages and boosted prices.
Revenue during the critical Christmas shipping period rose nearly 5 per cent compared with a year earlier.
UPS shares climbed $6.11, or 6 per cent, to $107.30 in late-morning trading.
Atlanta-based UPS earned $453 million in the fourth quarter, including a $1.24 billion pension charge that executives blamed on volatility in the stock market in late 2018. Profit was down from $1.1 billion a year earlier.
Removing the pension charge and other items, UPS said it earned $1.94 per share, which easily beat the forecast of $1.58 per share among analysts surveyed by FactSet.
Revenue was $19.85 billion, short of the analysts’ prediction of $19.97 billion.
UPS predicted that 2019 earnings will range between $7.45 and $7.75 per share. Analysts were expecting $7.67 per share.
UPS has spent heavily over the past three years in new sorting centres and automation to increase package-handling capacity. Executives credited the investment for a better holiday season in 2018, with fewer major delays than the previous year. The company delivered an average of 21 million packages a day in the U.S. during the quarter.
The company expects to open or upgrade 18 more facilities this year, contributing to heavy investment — between 8.5 per cent and 10 per cent of revenue — that was supposed to end in 2018.
“I don’t think it’s about the promise of the (capital spending) as much as it’s about the promise of a return” on investment, Chief Financial Officer Richard Peretz said in an interview.
Daniel Sherman, an analyst with Edward Jones, said the benefits of that spending appeared to be showing up sooner than many investors had believed.
“That’s a big deal. That’s one of the reasons the stock price is up,” he said. Another, he added, is that “their international business was much better than what people expected.”
Operating profit in U.S. domestic shipments slipped despite higher revenue.
CEO David Abney said the company will weather a predicted slowdown among major economies as well as in exports caused by uncertainty over trade policy.
Abney said on a call with analysts that while UPS faces headwinds, it should also benefit from investing in its network and targeting small and medium-size business customers.