UPS blames winter weather for drop in 1Q profit

DALLAS (AP) — First-quarter net income at UPS slumped 12% as winter storms increased costs for the shipping giant and cut into its revenue.

The company said Thursday that the rough start to the year means that full-year earnings will come in at the low end of its earlier forecasts.

Separately, UPS said that a new contract with the Teamsters union covering 253,000 employees will take effect on Friday. The five-year deal is retroactive to last August and includes wage and benefit increases and a new base wage of $10 per hour for part-timers, the company said.

About 125,000 full-time and part-time employees who were still on UPS-sponsored health plans will move to three separate multi-employer plans, UPS said in a regulatory filing. UPS said it will make a cash payment of $2.27 billion and transfer $1.2 billion for post-retirement obligations to the multi-employer plans.

UPS said that it expects to take a pretax charge of about $1.047 billion in the second quarter to cover the changes.

United Parcel Service reported first-quarter net income of $911 million, or 98 cents per share, well short of the $1.08 that Wall Street was expecting and less than the $1.04 billion, or $1.08 per share, it earned a year earlier.

UPS said winter storms reduced operating profit by $200 million as costs rose.

Revenue increased by 2.6% to $13.78 billion, but that was still shy of the $13.91 billion that analysts had forecast, according to a FactSet survey.

Average daily shipments in the U.S. rose 4.2%, but at the same time, revenue per package fell at home and abroad as customers shifted toward lower-priced services.

UPS said that full-year earnings would be at the low end of its earlier forecast of between $5.05 and $5.30 per share. Analysts expect $5.18 per share.

Shares of UPS Inc. fell 60 cents to close at $98.64. They are down 6% so far in 2014.