The U.S. Treasury Department is considering approving benefit cuts to the Central States Pension Fund to keep the multi-employer plan solvent. UPS pulled out of the fund in 2007 but agreed to make up any losses its remaining members experienced.

The Atlanta-based company may have to record a charge of $3.2 billion to $3.8 billion if the government approves the benefit cuts, executives said on a conference call after reporting earnings Thursday. UPS plans to oppose such a move by the Treasury.

Read: PBGC says multiemployer premiums must go up

“The market is reacting to the size of the potential liability and concern about the unknown impact to future numbers,” said David Vernon, an analyst at Sanford C. Bernstein & Co. “I think it’s overdone. This is an issue that’s going to be resolved in the courts regardless of what Treasury decides.”

UPS reported that earnings excluding items rose to $1.27 a share, beating the $1.22 average of analyst estimates compiled by Bloomberg. Revenue increased 3.2 percent to $14.4 billion, the Atlanta-based company said in a statement. Analysts had predicted $14.6 billion.

Executives attributed the higher earnings in part to a 15 percent increase in operating profit in its European unit. A 6 percent gain in business-to-consumer shipments helped propel U.S. domestic revenue up 3.1 percent.

UPS had fewer disruptions to its air and road network in the first quarter than in previous years that were plagued with costly storms. The company also has been partly insulated from a slowdown in U.S. freight volume because of a growing reliance on e-commerce, said Kevin Sterling, an analyst at BB&T Capital Markets.

UPS fared well during the peak holiday season in November and December, delivering its crush of packages ahead of Christmas. Chief rival FedEx Corp. was criticized for failing to beat the holiday deadline in some instances.

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