On April 1, 2024, a person walked into the UPS (United Parcel Service) customer center in Los Angeles, California.
Mario Tama | Getty Images
United Parcel Service It reported second-quarter profit and revenue on Tuesday that fell short of expectations and cut its 2024 revenue guidance.
The company’s shares fell more than 13% in midday trading, marking its worst day on record.
“Given the current sales momentum in our business, our revenue is just below the bottom line,” UPS Chief Executive Carol Tomé said on the company’s earnings call. “As a result, we are adjusting our full-year operating margin guidance to reflect the flow. The nature of traffic passing through our U.S. network.”
UPS now expects 2024 revenue of about $93 billion, compared with the previous forecast of $94.5 billion. However, full-year capital expenditures are now expected to be approximately $4 billion, instead of the previous $4.5 billion.
UPS noted that its current 2024 outlook still includes revenue from its trucking business, Coyote Logistics, to which it recently announced it was selling RXO Company. The deal is expected to close by the end of the year, freeing up cash the company plans to use for stock repurchases totaling about $500 million.
The company also recently signed a deal to acquire Mexican delivery company Estafeta, which it plans to shut down by the end of the year.
How the shipping giant does it Quarter ended June 30 Compared with Wall Street expectations, according to a survey of analysts by London Stock Exchange Group (LSEG):
- Earnings per share: Adjusted $1.79, expected $1.99
- income: $21.8 billion vs. $22.18 billion expected
The company reported net income of $1.41 billion, or 1.65 cents a share, for the quarter, compared with $2.08 billion, or $2.42 a share, a year earlier. After adjusting for the impact of resolving “international regulatory issues,” UPS reported earnings of $1.79 per share.
The company reported operating profit of $1.94 billion, down from $2.78 billion a year earlier.
“This quarter marked an important turning point for our company as our U.S. sales returned to growth for the first time in nine quarters,” Tomei said in the company’s earnings release. “As expected, our Operating profit was down in the first half of 2024 compared to last year’s report. Going forward, we expect a return to operating profit growth.”
Revenue also fell to $21.82 billion from $22.06 billion in the same period last year, mainly due to declines in the company’s domestic and international operations.
Revenue from its U.S. operations fell 1.9%, which the company said was primarily due to changes in product mix.
Chief Financial Officer Brian said: “Product mix is expected to continue to put pressure on unit revenue, but through expense management and labor inflation slowing, we expect operating profit to achieve double-digit growth in the third quarter, and U.S. operating margin will be To 10 percent,” Dykes said.
August 1 is the first anniversary of UPS Huge five-year labor contract In partnership with the International Brotherhood of Teamsters, that includes a significant wage increase. The company said on an earnings call that it expects contract-related cost pressures to “ease significantly” in the second half of this year.
UPS’s international business revenue fell 1% in the second quarter, which UPS attributed to a 2.9% decline in average daily transaction volume.
Revenue in the company’s third segment, Supply Chain Solutions, rose 2.6% from the year-earlier period, primarily due to growth in its logistics business, which includes healthcare.
Shipments
The report comes as weak freight demand and weak pricing in the shipping industry are creating what some say is Global freight decline. Investors turn to UPS earnings to learn whether demand is improving.
The company said demand improved outside the U.S.
The company said sales growth this quarter was driven in part by e-commerce, with business-to-consumer sales increasing to 58.5% of UPS’s total sales.
“We have two new e-commerce customers coming into our network, and you can imagine who they are. They are new e-commerce shippers in the United States, and the numbers are pretty explosive,” CEO Tomé said. “(The volume) is definitely higher than we expected coming into our network.”
A recent Wells Fargo analyst note predicted that Temu and Shein are driving the market, driving “substantial growth in global small package sales” and driving “favorable supply and demand and better pricing.”
Chief Financial Officer Dykes said that in the United States, the company is seeing a preference for “more economical products” from customers choosing ground shipping and its non-urgent value option, SurePost, over more expensive air freight.
UPS recently got stuck Competitors’ air cargo contracts with the U.S. Postal Service fedexwhich the company included in its fiscal 2024 guidance.
Although financial details of the deal have not been previously disclosed, UPS called the award “significant” in an April press release. The deal will generate $1.75 billion in revenue for FedEx in fiscal 2023, the company said.
Correction: UPS reported second-quarter profit and revenue on Tuesday. An earlier version incorrectly described the day.
