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United Parcel Service Inc. on Tuesday reported second-quarter profit that fell short of Wall Street expectations, due to weak demand for package deliveries and higher costs caused by the Teamsters labor contract.
Shares in the delivery company, seen as a gauge for the global economy, fell 8% in premarket trading, while shares in rival FedEx also fell about 2%.
UPS, FedEx and other delivery companies have slashed costs since the early pandemic e-commerce frenzy driven by stay-at-home consumers died down in the second half of 2021. Demand for doorstep deliveries has remained stubbornly sluggish ever since.
As temperatures rise across the country, some UPS drivers are still waiting to have air conditioning installed in their trucks.
United Parcel Service Co., Ltd.
UPS posted adjusted earnings per share of $1.79 for the quarter, below analyst expectations of $1.99, according to LSEG data.
The world’s largest delivery company by market capitalization also lowered its full-year adjusted operating profit margin forecast to 9.4% from a range of 10.0% to 10.6%.
A slight miss in forecasts was expected, but “the magnitude of the second-quarter miss and the big downward revision to full-year adjusted operating margin outlook will surprise even the biggest bears,” Jonathan Chappell, equity analyst at Evercore ISI, said in a client note.
FedEx founder Fred Smith says US’s record debt is ‘unsustainable’
| Ticker | safety | last | change | change % |
|---|---|---|---|---|
| Falcon | FedEx Corp. | 307.43 | +1.12 | +0.37% |
UPS has been cutting costs to boost profit margins, announcing in January that it would cut 12,000 jobs to save $1 billion.
The company in June inked a deal to sell its volatile truckload brokerage business, Coyote Logistics, to RXO for about $1 billion.
The company said it expects cost pressures to ease in the second half of the year as most of the labor costs that increased in the first year as part of the new five-year Teamsters contract will be absorbed by the second quarter.
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UPS reported second-quarter revenue of $21.8 billion, below analyst expectations of $22.18 billion.
But in a positive move for UPS, the company will replace FedEx as the United States Postal Service’s (USPS) primary expedited air service provider starting in October, a five-year deal that UPS expects to be profitable in the first year.
