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UPS fails to deliver as stock slides to four year lows

AInvestTuesday, Jul 23, 2024 8:54 am ET
1min read

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.

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