(Reuters) - United Parcel Service Inc (UPS.N) on Thursday said accelerated spending on weekend delivery and speedier service would take a bite out of 2020 expected earnings, sending shares down 6.2% in midday trading.
The world’s biggest package delivery firm is under pressure to wring more profit from booming e-commerce deliveries as it builds always-on operations to serve Amazon.com Inc (AMZN.O) and other online retailers.
Chief Executive David Abney told Reuters it will not take the company long to show results.
“The investments we’re making now are going to be accretive in 2021. There is a short-term return on this,” Abney said.
Those comments did not reassure investors. They sold shares after UPS forecast 2020 adjusted earnings of $7.76 to $8.06 per share - at least a penny below analysts’ average estimate of $8.07 per share, according to IBES data from Refinitiv.
Shares in UPS were down $7.20 to $108.56 in midday trading.
Amazon, UPS’ largest customer, is hitting the gas on speed with its one-day delivery push.
Chief Financial Officer Brian Newman said Amazon accounted for 11.6% of UPS revenue for the year. The company, which is building a competing logistics network, was the biggest single contributor to UPS growth in the fourth quarter after Amazon moved FedEx Corp (FDX.N) business to the carrier.
UPS is pulling forward projects that cater to online retailers, including plans to double weekend deliveries in the United States.
The Atlanta-based company is supporting that effort with extended package pickup hours for retailers who ship online orders from their stores. It is also hiring weekend delivery drivers, Friday night package sorters and overnight semitruck “sleeper teams” that get packages to hubs more quickly.
UPS’s profit for the fourth quarter matched Wall Street’s target of $2.11 per share, despite a slight miss on revenue for the period that included the all-important holiday quarter.
UPS Next Day Air volume jumped more than 22% in 2019, benefiting from the shift to next-day delivery and the Amazon-FedEx split, Cowen Analyst Helane Becker said in a client note.
That business also shows how customer demands for more, faster and cheaper delivery is playing out at UPS.
Revenue-per-piece from the company’s U.S. Next Day Air business fell 9.2% year over year, Becker said.
Reporting by Rachit Vats in Bengaluru and Lisa Baertlein in Culver City, California; Editing Nick Zieminski and Lisa Shumaker