UPS Inc. early Tuesday came in with weaker than expected first-quarter results as U.S. retail sales fell more than the company expected and it faced ongoing demand weakness in Asia.
Revenue was reported at $22.9 billion, down 6% from the same period a year ago. Consolidated operating profit was $2.5 billion, down 21.8% compared to the first quarter of 2022, and down 22.8% on an adjusted basis. Diluted earnings per share were $2.19 for the quarter; adjusted diluted earnings per share of $2.20 were 27.9% below the same period in 2022 and roughly in line with analysts’ median estimates.
UPS (NYSE: UPS) CEO Carol Tomé said in a statement that the company expects volumes to remain under pressure given current macroconditions.
Shares were off nearly $17 in Tuesday morning trading.
The domestic segment, the company’s largest, reported $14.98 billion in revenue, down from $15.1 billion in the 2022 quarter. Adjusted operating profit fell to $1.48 billion from $1.7 billion. Average daily volume fell by 5.4%.
International revenue fell to $4.54 billion from $4.87 billion, while operating profit declined to $806 million from $1.2 billion. Average daily volume dropped 6.2% year over year.
The company’s Supply Chain Solutions got hit by weakness in international forwarding rates and volumes, which were partially offset by growth in its health care business. Revenue dropped 22.5%.
In January, UPS provided a range of full-year financial targets based on the macroeconomic forecasts at that time. During the quarter, the global environment worsened due to challenging macroconditions and change in consumer behavior. Because of that, UPS expects full-year revenue and adjusted operating margin targets to be at the low end of prior guidance.
The updated guidance has revenue of about $97 billion and consolidated operating margin of around 12.8%.
Midwest Teamster
As Barron’s pointed out today, these results were inline with expectations.
My comments as follows do not reflect anything Carol may have said on the call. I will first note that the press release did not say one word about the labor negotiations, or volume declines having much if any relationship to speculation about shippers switching to different carriers. Some have for sure, and maybe that shows up next quarter.
I want to note a few things about guidance that is important relative to competitors. UPS did not announce layoffs. UPS did not announce a dividend cut. UPS did not announce a reduction in the buyback. UPS did not announce a reduction in the nearly $6 Billion in Capex. And if I am not mistaken, a full year of 12+% margins would be a record.
UPS has great management. But in this environment it would be hard to screw this up when you have a dedicated union workforce, where 99% of your full time Teamsters like me are here until they retire. A five year contract with labor rates fixed on a schedule has given UPS management the ability to navigate one of the more challenging labor cost environments in our nations’s history. And to be sure, this will continue because re-shoring is not merely a corporate slogan. China is actively turning away outside investment.
This company is crushing it in a very tough environment, and that simply does not happen without the Teamsters. We will not accept less than what we are worth. A status quo contract will get voted down and we will walk.