UPS reported better-than-expected Q1 profit on Tuesday as cost cuts offset still-soft demand for package delivery. UPS reported a resilient Q1 in 2024, with both earnings and revenue surpassing Wall Street estimates, despite a YoY decline. The company’s stock responded positively, rising 2.5% as investors welcomed the better-than-expected results.
CEO Carol Tomé expressed satisfaction with the company’s performance, stating, “Our financial performance in the first quarter was in line with our expectations, and average daily volume in the U.S. showed improvement through the quarter. Looking ahead, we expect to return to volume and revenue growth.”
UPS earnings
UPS Q1 adjusted profit slumped to $1.43 per share, down 35% from last year but above analysts’ estimates for $1.29, according to LSEG data.
UPS revenue was $21.7 billion, missing analysts’ target of $21.9 billion.
UPS reported a 3.2% decline in average daily volumes in its key U.S. business and a 5.8% drop in its international segment, but said volumes “showed improvement through the quarter”.
Revenue of UPS in both businesses “fell short of expectations,” Jonathan Chappell, equity analyst at Evercore ISI, wrote in a client note.
UPS future plan
To offset lower volumes, UPS is focusing on higher-margin deliveries for small businesses and healthcare companies. In particular, it plans to double its healthcare-related revenue to $20 billion by 2026.
It reported an adjusted operating margin of 8% for the quarter, down from about 11.1% last year. The company earlier said this quarter’s margin would be its lowest in 2024, with business conditions improving in the second half.
“UPS has been out of favor for several quarters,” said Chappell, who noted the company has had success with expense control.
UPS labor cost
The world’s biggest parcel delivery United Parcel Service (UPS) firm also is grappling with higher labor costs tied to its new Teamsters contract. In January, UPS said it would cut 12,000 non-union jobs as part of a bid to slash $1 billion in labor costs this year.
Meanwhile, UPS won a significant contract with the U.S. Postal Service, replacing rival FedEx as the agency’s largest air cargo service provider. That business was worth more than $1.7 billion to FedEx in fiscal 2023.
UPS stock
UPS shares were virtually unchanged at $144.75 in premarket trading. UPS stock was up more than 2% in early trading.
