UPS reported a 58% drop in second-quarter profit as the shipping giant recorded a charge tied to post-retirement obligations, which masked improved domestic package volume and stronger results in other segments.
Results for the period were choppy, as revenue growth was stronger than expected but UPS's adjusted profit was disappointing even after excluding the $665 million after-tax charge tied to the transfer of some post-retirement health and welfare benefit obligations to multi-employer healthcare plans. UPS (ups) on Tuesday also trimmed its expectations for 2014, now seeing an adjusted profit between $4.90 to $5 a share, down from the prior view of $5.05 to $5.30 a share.
Chief Financial Officer Kurt Kuehn said the lowered expectations were due to the company's plan to investment in its network capacity to ensure it meets customer demand for the peak holiday season. A surge in e-commerce orders last year surprised UPS, and led to some shipping delays.
While UPS's results in the first quarter were hurt by severe winter weather, many metrics improved in the latest period. U.S. domestic daily package volume jumped 7.4%, while export shipments jumped 9.1% with growth from all regions of the world. Europe led with daily shipments of more than 13%, while Asia grew more than 6%.
Overall, UPS reported net income of $454 million, or 49 cents a share, down from $1.07 billion, or $1.13 a share, a year earlier. Excluding the post-retirement charges, adjusted profit in the latest period totaled $1.21 a share. Total revenue climbed 5.6% to $14.27 billion.
Analysts surveyed by Bloomberg had projected an adjusted profit of $1.25 a share on $14.1 billion in revenue.