United Parcel Service (UPS) returned to sales and profit growth for the first time in nearly two years as the company benefited from higher volumes, more profitable packages, and steadying labour costs.
The company highlighted a 6.5 per cent increase in average daily US volume, pricing growth and additional air cargo volume.
The company’s shares rose 8.6 per cent in premarket trading in New York. Its stock was down 16 per cent so far this year as of Wednesday’s close, compared with a 22 per cent increase in the S&P 500.
Adjusted third-quarter earnings were US$1.76 per share, the company said Thursday (Oct 24) in a statement. Analysts had predicted US$1.63 per share on average, according to estimates compiled by Bloomberg. Revenue for the period came in line with analyst expectations of US$22.2 billion.
“After a challenging 18-month period, our company returned to revenue and profit growth,” said Carol Tomé, UPS chief executive officer.
The company lowered its consolidated revenue forecast to US$91.1 billion from US$93 billion, which had already been dropped last quarter from as much as US$94.5 billion. UPS said it also completed its sale of Coyote Logistics to RXO in the quarter.
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Thursday’s earnings report marks the first period of year-over-year growth in adjusted earnings per share after six quarters of declines. The parcel industry has been under pressure from weak shipping demand since a fall from pandemic highs. Meanwhile, inflation-weary customers are shifting to cheaper shipping options, squeezing carriers profits.
UPS has seen demand for next-day air shipping fall every year since 2021. In the meantime, low-margin shipments like those from e-commerce sites Shein and Temu are flooding the carrier’s network and utilising its more economical SurePost option. Average daily US next-day air volume dropped by 5 per cent drop from a year ago.
Shares of competitor FedEx were up 2.9 per cent in early trading after UPS posted results, a sign investors are optimistic that the demand backdrop is finally starting to pick up ahead of the holiday season.
This quarter, UPS was relieved of hefty upfront labour costs associated with the first year of its contract with the Teamsters, which reached its anniversary in August. It also added air cargo volume to its network thanks to a new agreement with the US Postal Service that went into effect Sept 30.
To cut costs, the company in January revealed a plan to save US$1 billion by eliminating 12,000 management jobs. BLOOMBERG
