UPS Hit By Warning

Updated from Jan. 11

UPS (UPS Quote) shares fell Wednesday after the shipper late Tuesday trimmed fourth-quarter guidance, blaming a sharp drop in domestic shipping volume in the last week of 2004.

Credit Suisse First Boston later downgraded the stock from outperform to neutral.

Shares in the Atlanta-based delivery giant fell $5.27, or 6.3%. to $78.03.

UPS told investors to expect fourth-quarter earnings of 75 to 76 cents a share, excluding a tax benefit. That's about a dime short of the company's previous estimate and the 85-cent Wall Street consensus view.

UPS said that before the Christmas-New Year week, volume growth was trending at 2.5% for the fourth quarter. But after the unusually slow week, fourth-quarter U.S. domestic volume ended up rising just 1.6%. UPS said the quarter was also hit by higher operating costs driven by severe weather in the Midwest.

The company reaffirmed 2005 guidance, however, saying it expects a 13% to 17% earnings gain for 2005.

After falling 32 cents in regular action to $83.30, UPS dropped $2.10 in postclose trading to $81.20.

Shares of rival FedEx(FDX Quote) fell in sympathy with UPS in after-hours trading, but FedEx announced late Tuesday that it was reaffirming its third-quarter guidance of 90 cents to $1 a share.