UPS Cuts Outlook Amid Slowdown in Parcel Volumes
Delivery firm expects lower profit margins this year after labor agreement with Teamsters Revenue in the second quarter slipped nearly 11% from a year earlier to $22.1 billion. Photo: Justin Sullivan/Getty Images By Esther Fung Aug. 8, 2023 7:08 am ET United Parcel Service cut its financial outlook for the year as a slowdown in global delivery volumes continues to hamper the business. The Atlanta-based package-delivery company on Tuesday said that its revenue and profit fell in the most recent quarter and warned that its operating margins this year would be slimmer than it expected. Revenue in the second quarter slipped nearly 11% from a year earlier to $22.1 billion, missing the $23 billion consensus forecast from analysts polled by FactSet. Profit fel
Revenue in the second quarter slipped nearly 11% from a year earlier to $22.1 billion.
Photo: Justin Sullivan/Getty Images
United Parcel Service cut its financial outlook for the year as a slowdown in global delivery volumes continues to hamper the business.
The Atlanta-based package-delivery company on Tuesday said that its revenue and profit fell in the most recent quarter and warned that its operating margins this year would be slimmer than it expected.
Revenue in the second quarter slipped nearly 11% from a year earlier to $22.1 billion, missing the $23 billion consensus forecast from analysts polled by FactSet.
Profit fell 27% to $2.08 billion. On a per-share basis excluding special items, its profit was $2.42, which also missed analysts’ forecasts.
In premarket trading, shares of UPS fell 6% to $172.
How does the Teamsters deal affect the business?
UPS executives are likely to detail what the new labor agreement with the Teamsters could mean for its operations.
The new agreement between Atlanta-based delivery company and the union covers about 330,000 workers and runs for five years. It included an increase in wages of $7.50 per hour for part-time and full-time workers over the length of the contract and included provisions for vehicle air-conditioning and cargo ventilation for driver safety.
Shares in UPS declined the day the agreement was announced amid concerns from some investors and analysts that costs would be much higher than they anticipated.
Parcel volume declines
In the U.S. domestic market, average daily package volume fell 9.9% in the June quarter, and the amount of revenue earned per package rose 3.3%.
Internationally, average daily package volume fell 6.6% over the same period.
The new outlook
UPS said revenue this year would be about $93 billion. Earlier this year, the company said it expected 2023 revenue to be between $97 billion and $99.4 billion, down from $100.3 billion last year.
The company now expects an adjusted operating margin of around 11.8% this year, down from an earlier guidance of 12.8% to 13.6%.
Write to Esther Fung at [email protected]
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