UPS shares slide 7% in pre-market on revenue miss, downside guidance
1min read United Parcel Service (UPS), a global leader in logistics and package delivery services, reported its fourth-quarter earnings for 2023. The company announced earnings per share (EPS) of $2.47, beating Street expectations by a penny. Revenues for the quarter declined by 7.8% year-over-year (YoY) to $24.92 billion, falling short of the $25.4 billion consensus.
In terms of segment performance, the US Domestic segment revenue decreased by 7.3% due to a 7.4% decline in average daily volume. The International segment also experienced a decline in revenue, down 6.9% driven by an 8.3% decrease in average daily volume, primarily attributed to market softness in Europe. The Supply Chain Solutions segment witnessed a significant decline in revenue of 11.4%, mainly due to market rate declines and excess market capacity in forwarding.
UPS provided guidance for the full year of 2024. The company anticipates revenue to range between $92.0 billion and $94.5 billion, slightly below estimates of $95.51 billion. The consolidated adjusted operating margin is projected to be around 10.0% to 10.6%, a slight decrease from the previous year's adjusted operating margin of 11.2%.
To support its operations and growth initiatives, UPS plans capital expenditures of approximately $4.5 billion in the upcoming year which was lower than the $5.2 billion projected by analysts.
The company intends to distribute dividend payments of approximately $5.4 billion. Despite a challenging year impacted by various factors such as market rate declines, excess market capacity, and softness in Europe, UPS remains committed to returning value to its shareholders. The company recently announced an increase in its quarterly dividend for the 15th consecutive year. The first-quarter 2024 dividend will be $1.63 per share on all outstanding Class A and Class B shares, payable on March 8, 2024.
Shares of UPS are down approximately 7% in pre-market trade. It has fallen below key support levels at the $152-154 area. It is testing the $146 level for support which is notable as this is where the stock broke out in late 2023 during the end of year rally. A failure to hold this level will raise reds flags and set up a test of the October lows at $133.
In conclusion, while UPS reported adjusted EPS of $2.47 in Q4, a 31.8% decrease compared to the same period in 2022, the company anticipates a challenging financial year ahead. The company's downside guidance for FY24 and revenue decrease across various segments highlight the current market challenges. However, UPS's commitment to shareholder value remains evident through the continued dividend increase.
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