UPS's Scrambled Delivery

Post office alternative UPS (NYSE: UPS) delivered investors a parcel of bad news last night. At least I think it was bad news. Sadly, the contents of the package, although it was clearly marked "fragile," arrived in several pieces, and attempts to reassemble it into a coherent whole met with only limited success. This Fool doubts whether the pieces ever constituted a coherent whole to begin with, but you be the judge:

Three months ago, UPS forecast Q4 2004 earnings of $0.83 to $0.87 per diluted share -- a 19%-24% increase over Q3 2003's "adjusted" $0.70 per share. Yesterday, the company amended that forecast, calling for (a) $0.81 to $0.82 in "adjusted" earnings, which exclude the favorable impact of a lower-than-expected tax rate being applied, or (b) $0.75 to $0.76 per share in (presumably "unadjusted") earnings, or (c) $0.84 to $0.87 in earnings as measured under generally accepted accounting principles.

With all these different numbers, investors have a lot of leeway in choosing how to interpret UPS's performance. They can say, "Gee, option (c) looks nice. It's actually a little better than UPS expected!" On the other hand, they can just as easily look to options (a) or (b) and, with a disapproving frown, mutter, "That's not nearly as much as they promised last quarter."

Which way would this Fool counsel reading UPS's numbers? Well, whenever a company gives you several alternative numbers to choose from, and painstakingly explains in a 500-word boilerplate that it's doing this to "provide meaningful information to assist investors and analysts in understanding our financial results and assessing our prospects for future performance," chances are pretty good that promoting understanding is the furthest thing from the company's mind. When prose serves to obfuscate fact, it's far more likely that confusion was the writer's intention from the outset.

So here's a novel idea: Pay no mind to whether UPS is reiterating its earnings expectations, ratcheting them down a notch, or ratcheting them down several notches. When a company declines to give you a straight story on how it did, why, go find yourself another company! There are thousands more to choose from. And, heck, if you've got your heart set on a courier company to invest in, there's a perfectly good alternative to UPS parked right outside on Wall Street, brightly marked in purple and orange.

Speaking of which, Motley Fool Stock Advisor recommendation FedEx (NYSE: FDX) preannounced its earnings yesterday, too, reaffirming its previous guidance of $0.90 to $1.00 per diluted share. Simple as that.

Did I just say that investing in companies that speak plainly to their owners is a "novel idea?" Silly me. Fellow Fool Bill Mann laid out the rationale for just such a policy in a July commentary titled "The Perfect Earnings Report." Give it a read. You'll love it. And if you work in a corporate PR department, do us all a favor -- read it twice.

Fool contributor Rich Smith owns no shares in any company mentioned in this article, but FedEx has been recommended in the Motley Fool Stock Advisor newsletter.