UPS tumbles as it grapples with business shift

United Parcel Service Inc. plunged the most in two years as a stronger U.S. dollar and the shift toward more consumer deliveries forced the courier to miss analysts' predictions for 2017 earnings and fourth-quarter profit.

The world's biggest package-delivery company is delivering a greater percentage of packages to homes, benefiting from e-commerce growth that has exceeded gains in the U.S. economy and sluggish industrial output.

The flip side is that making smaller deliveries to homes is less efficient than bigger stops at businesses.

'The pace came in greater than we thought, and it challenged us,” CEO David Abney said Tuesday.

The company has to 'double down” on its efforts to automate its warehouses and take other steps to drive down the costs of home deliveries, he said. And the growth in e-commerce, especially during the holiday season, is a two-edged sword.

'Cyber week has become a huge increase from one week to the next, and so that drives your costs up,” Abney said.

Cowen & Co. analyst Helane Becker said the shift toward consumer shipments will continue to challenge UPS.

'This weakness in the segment will likely lead to continued questions about growth of Amazon's delivery network and how UPS will continue to drive growth in a weak industrial environment,” she wrote in a note to investors.

Amazon.com has been expanding its own delivery capabilities in recent years, potentially threatening some business for UPS and rival FedEx Corp.