United Parcel Service recently reported lower-than-expected profit and revenue for the second quarter of the year, causing shares to drop by 7% in premarket trading. The company also revised its 2024 revenue guidance downwards, now expecting it to be approximately $93 billion, compared to the previous forecast of $94.5 billion. Additionally, UPS announced that full-year capital expenditures are now expected to be around $4 billion rather than the initial estimate of $4.5 billion. Despite these disappointing figures, the company is targeting around $500 million in share repurchases in 2024. UPS noted that the guidance provided does not include the impacts of the sale of its trucking business Coyote Logistics to RXO Logistics, a transaction that is expected to close by the end of the year. Furthermore, UPS recently entered into an agreement to acquire Mexican express delivery company Estafeta as part of its efforts to expand its international presence.
In the quarter ended June 30, UPS reported earnings per share of $1.79 cents adjusted, falling short of the $1.99 expected by Wall Street analysts. Revenue for the quarter stood at $21.8 billion, missing the anticipated $22.18 billion. The company’s reported net income for the quarter was $1.41 billion, or $1.65 per share, compared to $2.08 billion, or $2.42 per share, in the same period the previous year. Adjusting for the impact of settling an “international regulatory matter,” UPS reported earnings of $1.79 per share. The company’s operating profit for the quarter was $1.94 billion, a decrease from the $2.78 billion reported in the same quarter last year.
CEO’s Statement and Outlook
UPS’s Chief Executive Officer, Carol Tomé, acknowledged the challenges faced by the company in the first half of 2024 but expressed optimism about the future. Tomé stated, “This quarter was a significant turning point for our company as we returned to volume growth in the U.S., the first time in nine quarters. As expected, our operating profit declined in the first half of 2024 from what we reported last year. Going forward we expect to return to operating profit growth.” Despite the setbacks, UPS remains confident in its ability to achieve long-term success.
Revenue for UPS fell to $21.82 billion, down from $22.06 billion in the same quarter the previous year. The decline was primarily attributed to decreases in the company’s domestic and international segments. The U.S. operation saw a 1.9% decrease in revenue, mainly due to changes in product mix, while the international segment experienced a 1% decrease due to a 2.9% decline in average daily volume. On a positive note, the supply chain solutions segment recorded a 2.6% increase in revenue compared to the same period last year, driven by growth in logistics, particularly in the healthcare sector.
The global shipping industry is currently facing challenges such as weak freight demand and soft pricing, leading to what some experts describe as a global freight recession. Investors closely monitored UPS’s earnings report to gauge whether there were any signs of improving demand in the sector. Notably, UPS recently secured a lucrative air cargo contract with the United States Postal Service, beating out rival FedEx for the bid. This contract, set to commence on September 30, is expected to significantly boost UPS’s air cargo operations.
While UPS’s latest quarterly results fell short of expectations, the company remains determined to overcome its challenges and achieve growth in the future. By implementing strategic initiatives and expanding its international presence, UPS aims to solidify its position as a leading player in the global logistics industry.