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Stock of Ups Rises After Company Posts Profit Beat Despite Lower-than-expected Revenue

April 23, 2024
minute read

Shares of United Parcel Service Inc. saw an upturn on Tuesday, following the announcement of its latest quarterly earnings. The package-delivery giant continued its trend of surpassing profit expectations, although its revenue once again fell short of forecasts.

Despite a decrease in the first-quarter average daily package volume within the U.S. compared to the previous year, the rate of decline slowed down as the quarter progressed. The company noted a significant improvement in this trend compared to the previous quarter.

During midday trading, UPS shares surged by 2%, marking a 4.3% increase over a four-day winning streak. Initially, the stock experienced a post-results surge, then dipped by as much as 3% in premarket trading before recovering after the opening bell.

First-quarter net income dropped to $1.11 billion, or $1.30 per share, down from $1.9 billion, or $2.19 per share, in the same period last year. Adjusted earnings per share, excluding one-time items, stood at $1.43, surpassing the FactSet consensus of $1.28. This marks the 16th consecutive quarter that UPS has exceeded adjusted EPS expectations.

Operating profit, excluding various expenses such as wages and maintenance costs, fell by 36.5% to $1.61 billion. This decline was primarily attributed to the new Teamsters union contract announced in July 2023.

Total revenue decreased by 5.3% to $21.71 billion, falling short of the FactSet consensus of $21.84 billion. This marked the sixth consecutive quarter of revenue missing forecasts.

Chief Financial Officer Brian Newman acknowledged the challenges, stating, “While the macro environment in the first quarter showed improvement in some areas, continued soft demand pressured all three parts of our business.”

In the U.S., domestic-package revenue declined by 5% to $14.23 billion, below the FactSet consensus of $14.43 billion. Average daily volume decreased by 3.2% from the previous year, an improvement from the 7.5% decline in the fourth quarter.

International revenue dropped by 6.3% to $4.26 billion, missing expectations of $4.31 billion. Newman attributed this to ongoing challenges in Europe and Asia, with a 5.8% decrease in average daily volume but a 2% increase in average revenue per piece.

Supply chain revenue declined by 5.3% to $3.22 billion, surpassing expectations of $3.19 billion.

Regarding the recently acquired air cargo business from the U.S. Postal Service, CEO Carol Tomé expressed optimism, expecting it to contribute to revenue growth and improved operating margins. She noted that existing aircraft have sufficient capacity to handle this business, with plans to hire fewer than 200 additional pilots.

For the fiscal year 2024, UPS reaffirmed its revenue guidance range of $92 billion to $94.5 billion, aligning with the current FactSet consensus of $93.05 billion. Capital expenditure plans remain unchanged at $4.5 billion.

Year to date, UPS shares have declined by 5.7%, contrasting with a 7.7% increase in rival FedEx Corp. shares and a 6.1% advance in the S&P 500 index.

Bryan Curtis
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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