UNITED Parcel Service (UPS) missed Wall Street estimates for second-quarter earnings on Tuesday (Jul 23), hurt by subdued package delivery demand and higher costs from its Teamsters labour contract.
Shares of the delivery company, seen as a bellwether for the global economy, were down 8 per cent in premarket trading, while shares of rival FedEx fell about 2 per cent.
UPS, FedEx and other home delivery providers have been slashing costs since the end of home-bound consumers’ early pandemic e-commerce binge in late 2021. Demand for doorstep delivery has since been stubbornly lacklustre.
UPS posted an adjusted profit of US$1.79 per share for the quarter, below analysts’ estimates of US$1.99, according to LSEG data.
The world’s biggest package delivery firm by market capitalisation also lowered its full-year adjusted operating margin forecast to 9.4 per cent, from a range of 10 to 10.6 per cent.
While a modest miss on estimates was anticipated, “the magnitude of the 2Q miss, coupled with the large downward revision to the full-year adjusted operating margin guide, will surprise even the biggest bears,” Jonathan Chappell, equity analyst at Evercore ISI, said in a note to clients.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
UPS has been slashing costs to lift margins. In January, it said it would cut 12,000 jobs to save US$1 billion.
It struck a deal in June to sell off its volatile truckload brokerage business, Coyote Logistics, for about US$1 billion to RXO.
The company has said that it expects cost pressures to ease in the second half of the year, as a majority of the labour costs for the first year that rose as part of the new five-year Teamsters contract are absorbed by the second quarter.
UPS reported second-quarter revenue of US$21.8 billion, below analysts’ estimates of US$22.18 billion.
However, in an upside for the company, it will replace FedEx as the primary expedited air service provider for the US Postal Service (USPS) in October. UPS expects the five-year contract to be profitable in its first year. REUTERS
