UPS first quarter profit takes storm hit

UPS said bad weather cut into its profit in the first quarter, with net income declining about 12 percent from a year earlier.

Winter storms took a roughly $200 million bite out of operating profit, according to UPS. The company had “significant network disruptions” on more than half of the operating days during the quarter, causing it to rack up additional costs and lose revenue as some businesses closed shop.

Costs for overtime, snow removal and contracted work increased.

UPS reported net profit of $911 million in the first quarter, down from about $1 billion a year earlier. Per-share earnings amounted to 98 cents per share, down from $1.08 a year ago.

Revenue increased 2.6 percent to $13.8 billion, compared with $13.4 billion a year earlier. International business improved in the quarter for UPS, with strong growth in Europe.

The Sandy Springs-based shipping giant said it expects full-year earnings to come in at the bottom end of its previous estimate of $5.05 to $5.30 per share.

“Clearly the first quarter was challenging. The rest of 2014 looks quite promising,” UPS chief executive Scott Davis said. “The economy, though still not robust, it will be better than what we saw last year, both here in the U.S. and globally.”

Separately, UPS said it will invest about $100 million into preparations for the peak holiday season, after the late deliveries that plagued its customers and operation last December amid a rush of last-minute orders. That includes expanded buildings, trailers that can temporarily expand capacity of UPS facilities and technology investments.

Yet to be determined is how UPS and retailers might change shipping rates over the holidays.

“Our goal is to ensure we’re appropriately compensated,” said UPS chief sales, marketing and strategy officer Alan Gershenhorn.

Meanwhile, after nearly a year of back and forth on voting and negotiations between UPS and the Teamsters union, the Teamsters national negotiating committee this week declared a master UPS labor agreement in effect April 25. The unusual move overrides three union locals’ votes against their agreements.

The deal includes a provision that moves 140,000 workers from a company-sponsored health insurance plan to a Teamsters plan, a measure that “contributed to some of the supplements being rejected, ” the union has said. The company plans to make a $2.3 billion payment to the health care plans as it transfers $1.2 billion in liabilities for healthcare retirement benefits.

The company said it expects the new labor deal will improve service and profitability while giving workers wage and benefit increases.

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