UPS Worldport in Louisville, Ky. (Scotty Perry/Bloomberg)
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UPS Inc. declined to provide earnings guidance as it struggles to get a handle on volatility in the market, underscoring the challenges for the courier’s effort to reconfigure its network and revitalize its business.
The company said July 29 that it would not give a revenue or operating profit forecast for the full year “given the current macro-economic uncertainty.” UPS offered limited predictions around capital expenditures and dividend payments in 2025, and said it still expects $3.5 billion in expense reductions from its ongoing turnaround plan.
The hazy outlook suggests a rebound remains out of reach and extends the uncertainty around UPS’ business after the company said in April it wouldn’t update prior expectations. While many companies suspended guidance early this year due to volatility stemming from President Donald Trump’s trade policies, a number of those outlooks have been restored more recently.
“The overall U.S. economy demonstrated continued resilience, but our sector, specifically the U.S. small package market, was unfavorably impacted by U.S. consumer sentiment that was near historic lows,” CEO Carol Tomé said on a conference call to discuss quarterly results.
UPS ranks No. 1 on the Transport Topics Top 100 list of the largest for-hire carriers in North America, and UPS Supply Chain Solutions is No. 5 on the TT Top 100 list of the largest logistics companies. The company also ranks No. 3 on the TT Top 50 list of the largest global freight carriers.
The Atlanta-based courier is struggling to recapture the volume it experienced during the early years of the pandemic, when consumers turned to online shopping while stuck at home. The comedown, exacerbated for UPS by the threat of a union strike that sent some customers to rival firms, has proven stubborn thanks to weak demand across the economy. The company is also grappling with deep-rooted issues such as too much unprofitable volume and high cost structures.
Adjusted earnings in the second quarter were $1.55 a share, UPS said in a statement, narrowly missing the $1.56 average of analyst estimates compiled by Bloomberg. Package revenue $14.08 billion was better than expected.
UPS shares fell 6.6% as of 9:36 a.m. in New York, the most intraday since April 3. The stock tumbled 19% this year through the July 28 close, while the S&P 500 Index gained 8.6%.
“Sentiment was decidedly negative heading into” earnings, wrote JPMorgan analyst Brian Ossenbeck. “The results and lack of guidance will do little to change that at this point.”
To solve some of its woes, UPS has said it’s excising more than half of its Amazon business, which represented as much as 11.8% of UPS’ total revenue last year. As it pulls away from its largest customer, UPS is focusing on shipments that bring in higher margins than low-value e-commerce parcels.
To reorient around smaller volumes, UPS is closing and consolidating facilities and automating them, as well as reducing head count. Earlier this month the company offered its first-ever voluntary separation agreement to full-time union drivers. The offer includes $1,800 per year of service with a minimum payout of $10,000 for drivers to leave the company.
The buyout reflects the unprecedented moment that UPS finds itself in. After more than a century of continual growth, the company is now seeking to slim down its delivery network, and with it, its ranks.
While UPS focuses on internal efficiencies, there is less the company can do about trade policies affecting its business. New tariffs, especially the end of the de minimis exemption allowing certain imports into the country duty-free, hit the company’s most profitable trade lane, reducing average daily volume between the US and China by 35%, a bigger hit than the company had expected, Chief Financial Officer Brian Dykes said on a conference call with analysts.
Another miscalculation adding to UPS’ costs in recent months was the decision to break away from a partnership with the U.S. Postal Service in which the company handed off packages to the agency for pricey last-mile deliveries. UPS brought those deliveries in house this year, and found that the cost was higher than expected. Tomé told analysts July 29 that the company has “re-engaged” with the Postal Service, coinciding with new leadership at the agency.
