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Why United Parcel Service, Inc. Stock Fell 7% Thursday

Daniel Sparks, The Motley Fool

What happened

Shares of United Parcel Service (NYSE: UPS) took a hit on Thursday after the package delivery company reported results for its fourth quarter. The stock fell as much as 7.3% in the morning, but is down 6% at 12:50 p.m. EST.

Though UPS' fourth-quarter revenue and non-GAAP earnings per share were both higher than consensus analyst estimates, plans to ramp up spending to help upgrade its delivery network may have some investors concerned.

A package at a doorstep

Image source: Getty Images.

So what

Revenue for the quarter was $18.83 billion, up 11% compared to the fourth quarter of 2016. This marked an acceleration from UPS' full-year 2017 revenue growth of 8%.

Adjusted earnings per share were $1.67, up 2.5% year over year.

Highlighting the company's need for a more fortified delivery network, particularly during the holidays, UPS said that during "cyber-periods" the volume of shipments exceeded its network capacity. This drove $125 million in incremental operating costs in the domestic market.

Now what

UPS plans to address the pressure on its delivery network seen during the holiday season by taking advantage of "accelerating" opportunities and significant resources made available from the Tax Cuts and Jobs Act. The company said it will spend $6.5 billion to $7 billion on capital expenditures in 2018. Spending will be "mostly dedicated to investments in new technology, aircraft and automated capacity," UPS noted.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.