United Parcel Service (UPS) reported lower-than-expected profit and revenue for the second quarter and adjusted its 2024 revenue guidance. The company’s stock fell 12%, marking its worst trading day on record. UPS now anticipates 2024 revenue to be approximately $93 billion, down from an earlier forecast of up to $94.5 billion. Additionally, full-year capital expenditures are expected to be around $4 billion, a reduction from the previous estimate of $4.5 billion.
CEO Carol Tomé noted, “Our revenue came in just short of the low end given the current volume momentum we are now experiencing in our business. Accordingly, we are adjusting our full-year operating margin guidance.”
The revised outlook still includes revenue from UPS’s trucking business, Coyote Logistics, which is being sold to RXO, Inc. This transaction is expected to close by the end of the year, freeing up cash for share repurchases totaling around $500 million. Additionally, UPS has entered into an agreement to acquire Mexican express delivery company Estafeta, aiming to finalize the deal by year-end.
For the quarter ended June 30, UPS reported adjusted earnings per share of $1.79, missing the $1.99 expected by analysts. Revenue was $21.8 billion, short of the anticipated $22.18 billion. The company’s net income for the quarter was $1.41 billion, or $1.65 per share, down from $2.08 billion, or $2.42 per share, a year earlier. Adjusting for certain impacts, UPS posted earnings of $1.79 per share.
Operating profit dropped to $1.94 billion from $2.78 billion a year earlier. Revenue decreased to $21.82 billion from $22.06 billion, primarily due to declines in domestic and international segments. The U.S. operation saw a 1.9% revenue decrease, attributed mainly to changes in product mix.
CFO Brian Dykes highlighted ongoing challenges, stating, “Product mix is expected to continue to pressure revenue per piece. However, through expense management and slowing labor inflation, we expect to grow third-quarter operating profit by double digits and exit the year with a U.S. operating margin of 10%.”
The company’s international segment saw a 1% revenue decline, linked to a 2.9% drop in average daily volume. Conversely, the supply chain solutions segment increased revenue by 2.6% due to growth in logistics, including healthcare.
UPS noted pockets of improved demand outside the U.S., driven partly by e-commerce. Business-to-consumer volume increased, making up 58.5% of UPS’s total volume. CEO Tomé mentioned, “There were two new e-commerce customers that came into our network, and their volume was certainly more than we anticipated.”
Recently, UPS secured an air cargo contract with the United States Postal Service (USPS), taking over from rival FedEx. This contract, starting October 1, is expected to significantly impact UPS’s fiscal 2024 results.
Despite current challenges, UPS remains optimistic about future growth, particularly in e-commerce and logistics sectors, as it adjusts its strategies to navigate economic pressures and shifting market demands.
READ MORE: