United Parcel Service (UPS) reported its second-quarter profit and revenue, which fell below expectations, causing the company’s shares to drop by 9% in premarket trading. UPS revised its 2024 revenue guidance to approximately $93 billion, down from the previous forecast of up to $94.5 billion. However, the company expects full-year capital expenditures to be around $4 billion, lower than the previous estimate of $4.5 billion. UPS also announced plans for $500 million in share repurchases in 2024.
The company’s guidance does not include the impact of the recently announced sale of its trucking business Coyote Logistics to RXO Logistics. This transaction is expected to close by the end of the year. Additionally, UPS has entered into an agreement to acquire Mexican express delivery company Estafeta as part of its efforts to expand internationally.
In terms of financial performance, UPS reported earnings per share of $1.79, adjusted, compared to the expected $1.99. Revenue for the quarter was $21.8 billion, falling short of the expected $22.18 billion. The company’s net income for the quarter was $1.41 billion, or $1.65 per share, down from $2.08 billion, or $2.42 per share, in the same period last year. After adjusting for the impact of settling an “international regulatory matter,” UPS posted earnings of $1.79 per share. Operating profit declined to $1.94 billion from $2.78 billion in the previous year.
UPS CEO Carol Tomé acknowledged that this quarter marked a turning point for the company with a return to volume growth in the U.S., after nine quarters of decline. She also mentioned that operating profit declined in the first half of 2024 but expects it to grow going forward.
The decline in revenue can be attributed to decreases in both the domestic and international segments. The U.S. operation saw a 1.9% decrease in revenue, primarily due to changes in product mix. The international segment experienced a 1% decline in revenue, which UPS attributes to a 2.9% decrease in average daily volume. On the other hand, the supply chain solutions segment saw a 2.6% increase in revenue, driven by growth in logistics, including healthcare.
UPS’s earnings report comes at a time when the shipping sector is facing weak freight demand and soft pricing, leading to what some experts call a global freight recession. Investors were looking to UPS’s earnings to gauge whether there were any signs of improvement in demand.
In a significant development, UPS secured an air cargo contract with the United States Postal Service (USPS), taking over from rival FedEx. Starting on September 30, UPS will become USPS’s primary air cargo provider. While financial details of the deal were not disclosed, FedEx previously stated that the contract brought in $1.75 billion in fiscal 2023.
In conclusion, UPS’s second-quarter earnings fell short of expectations, resulting in a decline in its shares. The company revised its 2024 revenue guidance and announced plans for share repurchases. UPS also continues to expand internationally through acquisitions such as Coyote Logistics and Estafeta. The decline in revenue was mainly due to changes in product mix and a decrease in average daily volume. However, the supply chain solutions segment showed growth, driven by logistics, including healthcare. UPS’s contract with USPS is a significant win for the company and adds to its market position.
