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UPS Slips To Q4 Loss On Hefty Pension Charge, Guides 2013 Below View


United Parcel Service (UPS), the world's largest package delivery company, reported Thursday a loss for the fourth quarter compared to a profit last year, hurt by a significant charge related to pension liabilities restructuring.

Despite striping down the charge, adjusted earnings per share missed analysts' expectations, while quarterly revenues topped their estimates by a whisker. The company also provided earnings guidance for the full-year 2013, below Street view.

The company formally withdrew on Wednesday its $6.8 billion offer for Dutch rival TNT Express N.V. (TNTEF, TNTEY) after the European Commission formally prohibited the proposed deal, citing competitive concerns. UPS will pay TNT a termination fee of 200 million euros for the withdrawal.

The two firms announced the deal in March 2012, when UPS agreed to buy the TNT Express for a sweetened offer of 9.50 euros per share.

The Atlanta, Georgia-based company reported a net loss of $1.75 billion or $1.83 per share for the fourth quarter, compared to net income of $725 million or $0.74 per share in the prior-year quarter.

Results for the latest quarter include mark-to-market, after-tax, non-cash charge of $3.0 billion related to the restructuring of pension liabilities for certain employees. Excluding items, adjusted net income for the quarter was $1.28 billion or $1.32 per share, compared to $1.25 billion or $1.28 per share in the prior-year quarter.

On average, 24 analysts polled by Thomson Reuters expected the company to earn $1.38 per share for the fourth quarter. Analysts' estimates typically exclude one-time charges and gains.

Revenues for the quarter grew 2.9 percent to $14.57 billion from $14.17 billion in the same quarter last year, and topped nineteen Wall Street analysts' consensus estimate of $14.43 billion by a whisker.

U.S. domestic package revenue increased 3.0 percent to $8.93 billion, international package revenue grew 1.5 percent to $3.20 billion, and supply chain and freight revenues improved 4.0 percent to $2.44 billion from last year.

In the fourth quarter, UPS delivered above one billion packages of 1.15 billion, up 1.2 percent from the year-ago quarter, despite one less operating weekday in the latest quarter. Average volume per day grew 2.9 percent to 18.82 million pieces, and average revenue per piece increased 1.4 percent to $10.45 from last year.

Total operating expenses for the quarter increased 33.8 percent to 17.35 billion from the year-ago quarter, with compensation and benefits surging 54.5 percent to 11.94 billion from last year.

For fiscal 2012, the company reported net income of $807 million or $0.83 per share, sharply lower than $3.80 billion or $3.84 per share posted last year.

Excluding special items, adjusted net income for the year was $4.39 billion or $4.53 per share, compared to $4.31 billion or $4.35 per share in the prior year. Analysts expected the company to report earnings of $4.58 per share for fiscal 2012.

Total revenues for the full year increased 1.90 percent to $54.13 billion from $53.11 billion reported in the previous year. Street was looking for full-year 2012 revenues of $54.00 billion.

"UPS delivered its best ever adjusted earnings per share with strong free cash flow, even in the midst of weaker than expected global economic conditions in 2012," CFO Kurt Kuehn noted.

Looking ahead for 2013, the company expects adjusted earnings in a range of $4.80 to $5.06 per share. Street is currently looking for full-year 2013 earnings of $5.11 per share.

The company also raised its guidance for 2013 share repurchases to $4.0 billion from $1.5 billion.

"Despite modest macro growth expectations for 2013 and uncertainty in the U.S. caused by the lack of progress in Washington, the UPS business model will deliver consistent results, with operating profit growth in all segments," Chairman and CEO Scott Davis said in a statement.

UPS closed Wednesday's regular trading session at $81.23, down $0.71 on a volume of 3.88 million shares. In the past 52-week period, the stock has been trading in a range of $69.56 to $82.76.

by RTTNews Staff Writer

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