UPS fails to deliver as stock slides to four year lows

United Parcel Service (UPS) reported its Q2 2024 earnings, falling short of analyst expectations. The company posted adjusted earnings per share (EPS) of $1.79, below the estimated $1.99, and revenue of $21.8 billion, which also missed the consensus estimate of $22.18 billion. This represents a year-over-year decline of 1.9% in revenue.

In the U.S. domestic package segment, revenue declined by 1.9% to $14.12 billion, missing expectations of $14.54 billion, with average daily volume falling by 2.6%. International revenue decreased by 1% to $4.37 billion, amid a 2.9% drop in average daily volume. Despite these declines, CEO Carol Tome highlighted that the company experienced volume growth in the U.S. for the first time in nine quarters, marking a significant turning point.

For the three months ended June 30, UPS earned $1.41 billion, or $1.65 per share. After stripping out one-time costs, adjusted earnings were $1.79 per share, still falling short of analysts' expectations of $1.98 per share. The quarter included a $120 million charge related to settling an international regulatory matter and other transformation-related expenses.

Operating expenses increased by about 3% in the quarter, including a 2.7% rise in compensation and benefits expenses. The Teamsters' approval of a tentative contract agreement in September, which included pay raises for full- and part-time union workers, contributed to these increased costs. This agreement concluded contentious labor negotiations that had threatened to disrupt deliveries.

Quarterly revenue was $21.82 billion, short of Wall Street’s estimate of $22.31 billion. The company updated its full-year 2024 revenue guidance to approximately $93 billion, compared to the previous range of $92 billion to $94.5 billion. Analysts had expected full-year revenue of $92.77 billion.

UPS stock dropped more than 7% in premarket trading following the disappointing earnings report and revised guidance. The company now anticipates an operating profit of about $8.7 billion, down from the prior guidance midpoint of $9.6 billion. Lower shipping volumes, weaker pricing, and higher labor costs continue to weigh on the company's profitability.

Despite the challenging results, UPS restarted its share repurchase program, targeting $1 billion annually. The company aims for a consolidated adjusted operating margin of approximately 9.4% and capital expenditures of around $4 billion for the full year. Investors will be closely watching for guidance on when business might pick up to improve profits.