United Parcel Service (UPS) Inc. surpassed analysts’ projections with its reported profits, attributing the success to effective management of the workforce and the optimization of delivery routes.
In its statement on Tuesday, the Atlanta-headquartered company disclosed adjusted first-quarter earnings of $1.43 per share, outperforming the average analyst’s estimate of $1.30 per share compiled by Bloomberg. UPS also affirmed its full-year guidance.
According to Bloomberg report, UPS’ shares rose 1.4% before regular trading in New York. The stock fell 7.5% this year through Monday’s close.
- “Average daily volume in the U.S. showed improvement through the quarter,” Carol Tomé, Chief Executive Officer, said in the statement. “Looking ahead, we expect to return to volume and revenue growth.”
Revenue to climb to $114 billion in 2026
Tomé is trying to expand sales and profit amid soft demand for package delivery coming out of the pandemic. UPS last month said it expects consolidated revenue to climb as high as $114 billion in 2026, up 25% from last year.
The report noted that the company announced a deal this month with US Postal Service to become its primary air cargo provider, replacing competitor Fedex Corp after 22 years. The pact takes effect later this year.
The growth push follows a strategic plan earlier in Tomé’s tenure to become better, not bigger, an initiative to focus on more profitable business potentially at the expense of volume growth. The effort helped UPS’ market value roughly double in her first two years. The courier has faced increased competition lately, while inflation has also been a challenge.
Higher labour costs
According to the report, UPS is contending with higher labour costs after agreeing to a new union deal last year that raises wages and benefits over five years, with the biggest increase coming in 2024. The deal also sees upward adjustments to pension and health benefits and other expenses, including a new paid holiday.
UPS said in January that it would cut 12,000 white-collar jobs — about 14% of its full- and part-time managers — to reduce costs. The efficiency push is being aided in part by new technologies, including artificial intelligence, the company has said.
It also is in the process of a strategic review of the Coyote truck brokerage business, which could result in a sale. UPS bought the business for $1.8 billion in 2015.
Nairametrics reported that this decision comes shortly after the company reached a costly agreement with the Teamsters union and amid subdued demand for its delivery services, which has led to a less optimistic annual revenue forecast.
According to a report from Financial Times, the company announced on Tuesday that the job cuts will primarily target management positions, affecting approximately 85,000 employees.
It anticipates that three-quarters of these layoffs will occur within the first half of the year. UPS, with a global workforce of 495,000 individuals, does not foresee reinstating these positions in the foreseeable future.
The Delivery group said it now expected revenues in a range between $92 billion and $94.5 billion in 2024, below Wall Street forecasts for $95.6 billion. Its revenue in 2023 was $91 billion, a 9.3% drop from 2022.
UPS, often regarded as a bellwether for the global economy due to the breadth of packages and documents it ships, reported fourth-quarter revenue of $24.9 billion that was down 8% year on year and missed Wall Street forecasts due to a decrease in average daily parcel volumes.
