United Parcel 2025 Q1 Earnings Modest Growth as Net Income Rises 6.6%

United Parcel (UPS), ranking 170th by market capitalization, reported its fiscal 2025 Q1 earnings on May 7th, 2025. The company's first-quarter results surpassed Wall Street expectations, with revenue slightly falling to $21.55 billion but beating forecasts of $21.05 billion. UPS decided not to provide a full-year outlook due to economic uncertainties, maintaining a cautious stance. The company's restructuring efforts and cost management were highlighted as key factors in achieving these results.

Revenue
United Parcel's revenue for the first quarter of 2025 saw a slight decline of 0.7% compared to the previous year, reaching $21.55 billion. The U.S. Domestic Package segment generated $14.46 billion, reflecting a 1.4% growth. Meanwhile, International Package revenue increased by 2.7% to $4.37 billion. However, the Supply Chain Solutions segment experienced a significant decline of 14.8%, bringing in $2.71 billion, primarily attributable to the divestiture of Coyote.

Earnings/Net Income
United Parcel's EPS rose by 7.7% to $1.40 in 2025 Q1 from $1.30 in 2024 Q1, marking continued earnings growth. The company's profitability strengthened with net income of $1.19 billion in 2025 Q1, marking a 6.6% growth from $1.11 billion in 2024 Q1. The increase in EPS reflects positive earnings performance amidst challenging conditions.

Price Action
The stock price of United Parcel has edged up 0.27% during the latest trading day, has edged down 1.41% during the most recent full trading week, and has dropped 3.84% month-to-date.

Post-Earnings Price Action Review
In the past five years, the strategy of purchasing United Parcel Service (UPS) shares following a quarter with a revenue drop and holding for 30 days has consistently resulted in poor performance. This approach yielded a return of -21.76%, significantly lagging behind the benchmark return of 19.66%. The excess return was -41.42%, and the strategy's compound annual growth rate (CAGR) was -6.48%, highlighting substantial losses. The maximum drawdown was -27.19%, indicating high risk, which was not offset by a moderate volatility of 8.88% and a Sharpe ratio of -0.73. This historical performance suggests caution in adopting such a strategy amid declining revenue periods.

CEO Commentary
Carol Tomé, CEO of UPS, highlighted the company’s resilience amidst a challenging economic landscape, emphasizing that the actions taken to reconfigure the network and reduce costs are timely and necessary. She noted that despite a marginal decline in revenue, the company achieved a net income increase due to effective cost management and operational efficiencies. Tomé remarked on the strategic shift towards higher-margin business segments, including healthcare, while addressing the significant reduction in reliance on unprofitable volumes from major customers like Amazon. She expressed optimism about UPS emerging stronger and more agile, reinforced by ongoing initiatives aimed at enhancing profitability.

Guidance
For 2025, UPS expects revenue to be approximately $89 billion and an operating margin of about 10.8%. The company plans capital expenditures of around $3.5 billion and anticipates total costs related to its restructuring efforts to be between $400 million and $600 million. UPS also forecasts a diluted EPS of $1.49 for the first quarter of 2025, reflecting a cautious yet optimistic outlook amid ongoing economic uncertainties.

Additional News
UPS announced a definitive agreement to acquire Andlauer Healthcare Group for $1.6 billion, aiming to bolster its global healthcare logistics capabilities. The acquisition strengthens UPS's cold chain logistics and specialized healthcare transportation services. Furthermore, UPS appointed Kevin Clark, CEO of Aptiv PLC, to its Board of Directors, bringing extensive experience in finance and technology. Lastly, UPS declared a regular quarterly dividend of $1.64 per share, reflecting its ongoing commitment to returning value to shareholders. These strategic moves reinforce UPS's focus on growth and operational efficiency in a challenging market environment.