UPS stock rises after long profit streak as deliveries improve

By Tomi Kilgore

Operating profit falls more than 30% mainly due to higher labor costs following new Teamsters contract

Shares of United Parcel Service Inc. rose Tuesday, after the package delivery giant extended its long streak of higher quarterly profits but once again reported lower-than-expected revenue.

The company said, however, that although the average daily volume of packages delivered in the United States in the first quarter declined compared to last year, the rate of decline slowed as the quarter progressed and showed a “clear improvement » compared to the fourth quarter.

The stock (UPS) was up 2% in midday trading and 4.3% during a four-day winning streak. The stock initially jumped after the earnings release, then posted a premarket loss of as much as 3% before rebounding after the opening bell.

First-quarter net income fell to $1.11 billion, or $1.30 per share, from $1.9 billion, or $2.19 per share, in the same period last year.

Excluding one-time items, adjusted earnings per share of $1.43 beat the FactSet consensus of $1.28. This is the 16th consecutive quarter in which UPS has exceeded adjusted EPS expectations, according to FactSet data.

Operating profit, which excludes expenses such as employee salaries, repairs, maintenance and fuel costs, fell 36.5% to $1.61 billion, largely due to new contract with the Teamsters union, announced in July 2023.

Total revenue fell 5.3% to $21.71 billion, below the FactSet consensus of $21.84 billion. It was the sixth consecutive quarter that revenue fell below forecasts, and the seventh consecutive failure.

“While the macroeconomic environment in the first quarter showed improvement in some areas, continued weak demand put pressure on all three areas of our business,” Chief Financial Officer Brian Newman said on the post call. -results with analysts, according to an AlphaSense transcript.

U.S. domestic plan revenue fell 5% to $14.23 billion, missing the FactSet consensus of $14.43 billion.

Average daily volume was down 3.2% from last year, but that compares to a 7.5% ADV decline in the fourth quarter. And average revenue per piece fell 0.3% from last year, after being “slightly positive” in the previous quarter.

For International, revenue fell 6.3% to $4.26 billion, below expectations of $4.31 billion, “as the macroeconomic environment remains challenging, primarily in Europe and in Asia,” Newman said. Average daily volume decreased by 5.8%, but average revenue per piece increased by 2%.

Supply chain revenue fell 5.3% to $3.22 billion, but beat expectations of $3.19 billion.

Regarding the outlook for the air cargo business it won from the U.S. Postal Service, announced earlier this month, Chief Executive Carol Tom said the business would contribute to revenue growth and improvement in operating margins.

Tom said there is “plenty of space” on existing aircraft to handle USPS operations. So the company won't need to buy planes, it will hire a few pilots, but fewer than 200, Tom said.

As CFO Newman said, “It's a good deal for us, and we're moving quickly to start shipping this cargo.”

For 2024, the company reaffirmed its revenue guidance range of $92 billion to $94.5 billion, which surrounds the current FactSet consensus of $93.05 billion. The company also kept its capital spending plans unchanged at $4.5 billion.

The stock has gained and lost 5.7% since the start of the year, while shares of rival FedEx Corp. (FDX) gained 7.7% and the S&P 500 Index rose 6.1%.

-Tommy Kilgore

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04/23/24 1145ET

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