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Retail

Here’s why UPS’s stock price is sinking this morning

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October 27, 2015, 10:54 AM ET
UPS's Income Rises 90 Percent
GLENDALE, CA - JULY 22: A United Parcel Service (UPS) driver delivers packages on July 22, 2010 in Glendale, California. UPS said its second quarter profit nearly doubled posting a net profit of $845 million, or 84 cents a share, compared to $445 million or 44 cents a year ago. (Photo by Kevork Djansezian/Getty Images)Photograph by Kevork Djansezian — Getty Images
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Shares of United Parcel Service are sinking Tuesday after the package delivery company posted a higher quarterly profit, but also said its revenue in the quarter was hurt by the strong U.S. dollar, and reiterated its full-year earnings outlook.

During a conference call with analysts, executives at the Atlanta-based company said that package volumes during this year’s key holiday peak season between Thanksgiving and New Year’s should rise 10 percent.

UPS (UPS) said that on Dec. 22, its anticipated peak day, it expects to ship 36 million packages, or around double its daily average. After two years of disappointing fourth-quarter results, UPS is under pressure to deliver this Christmas.

Chief Executive David Abney told analysts that thanks to additional capacity in its network and selective price increases to “provide excellent service at an appropriate cost.”

The world’s largest package delivery company is often seen as a barometer of U.S. economic health. Abney said the company has seen some softness in the U.S. economy and that the strength of the U.S. dollar would continue to impact exports, as would soft global demand.

UPS said that without the impact of the U.S. currency on its results, third-quarter revenue would have been up for the quarter. UPS also said that lower fuel surcharge revenue had weighed on results.

UPS reported third-quarter net profit of $1.26 billion, or $1.39 per share, up 4 percent from $1.21 billion, or $1.32 per share, a year earlier.

Analysts, on average, expected earnings per share of $1.37.

UPS said that it expects full-year earnings per share to come in at the high end of its previously-announced forecast of a range from $5.05 to $5.30. The company said earnings per share should rise in the “low double digits” in the fourth quarter versus the previous year.

Revenue for the quarter fell slightly to $14.24 billion from $14.29 a year earlier. Analysts had expected revenue for the quarter of $14.43 billion.

The company said on a currency-neutral basis, its revenue would have been up 1.8 percent. The strong U.S. dollar means that sales overseas are lower when translated into dollars.

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