Why United Parcel Service, Inc. (UPS) Earnings Are in Trouble

With a July 31 deadline, negotiations apparently haven’t resulted in a settlement of the labor dispute yet. UPS cited the labor negotiations as slowing package volume growth as well.

Still, the big catalyst for future growth remains online commerce. Internet sales rose 16% in the U.S. last year, yet with e-commerce representing only about 5% of total sales of consumer goods, there’s still plenty of room for further gains. Key relationships with Amazon.com, Inc. (NASDAQ:AMZN) will be important to maintain as the online leader continues to seek ways to expand its reach, but UPS also needs to ensure that it gets its share of competitors’ shipping volume as they seek to dethrone Amazon.com, Inc. (NASDAQ:AMZN)’s dominance of the sector.

With the UPS earnings preannouncement already having answered many questions, investors should focus on initiatives the company is making to try to keep costs under control. Things like expanding its natural-gas fleet of trucks should help it take advantage of lower fuel costs and increase efficiency, but cost-cutting can only do so much without a boost in global economic activity.

The article Why UPS Earnings Are in Trouble originally appeared on Fool.com is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends Amazon.com, FedEx, and UPS and owns shares of Amazon.com.

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