United Parcel Service Inc (UPS.N) reported fourth-quarter earnings below analysts' estimates on Thursday and forecast weaker-than-expected profit for 2013, sending its shares lower.
UPS, the world's largest package-delivery company, said it expects earnings to rise 6 percent to 12 percent in 2013, to $4.80 to $5.06 per share, which is below the average Wall Street target of $5.11.
"We remain in a cycle of mixed growth and mixed signals," Chief Executive Scott Davis told investors on a conference call. "I have talked to a number of customers and it is clear that fiscal uncertainty continues to erode business confidence and growth prospects. This will continue until Washington starts to compromise."
The final weeks of the fourth quarter saw a standoff between Democrats and Republicans over the "fiscal cliff," which had threatened higher taxes and large spending cuts.
UPS' largest U.S. rival, FedEx Corp (FDX.N) has been struggling with falling profits as customers increasingly send goods by ground, a less costly and less profitable mode of transport than air.
Because of the huge volume of packages they handle each day, UPS and FedEx are viewed as barometers of economic activity. UPS' profit decline came in a quarter when the U.S. economy contracted by 0.1 percent, as per a government report on Wednesday that surprised economists.
The company posted a fourth-quarter net loss of $1.75 billion, or $1.83 per share, after a $3 billion noncash charge for pension obligations. In the year-earlier period, it earned $725 million, or 74 cents per share.
The company said costs related to Superstorm Sandy, which pounded the New York metropolitan area in late October, sliced profit by 5 cents per share in the quarter.
Factoring out one-time, noncash items, the profit came to $1.32 per share, below the analysts' average estimate of $1.38, according to Thomson Reuters I/B/E/S.
Revenue rose 2.9 percent to $14.57 billion from $14.17 billion.
UPS shares fell 1.8 percent to $79.75 in premarket trading.
'MOVING ON' FROM TNT
Earlier this month, UPS dropped its $7 billion bid for Dutch delivery firm TNT Express TNTE.AS after European regulators said they would veto the deal, citing antitrust concerns.
UPS, which had sought to expand quickly in Europe, will now likely have to grow on the continent on its own, rather than potentially run afoul of the European Commission again.
"It would be an understatement to say that we are disappointed by the decision of the European Commission to block the acquisition," Davis said. "While we viewed the TNT acquisition as a compelling growth platform and it consumed a lot of internal resources, we are moving on."
At Wednesday's close, UPS shares were up about 7 percent over the past year, trailing the 14 percent rise of the Standard & Poor's 500 index .SPX.
(Reporting by Scott Malone in Boston; Editing by Jeffrey Benkoe and Lisa Von Ahn)