A UPS vehicle at a facility in New York, on May 9, 2022.ANDREW KELLY/Reuters
United Parcel Service UPS-N is to cut 12,000 jobs and explore strategic options for Coyote, its truckload freight brokerage business, after the company forecast full-year revenue below estimates.
Shares in the world’s largest parcel delivery company fell 6.3 per cent in early trading.
UPS plans to cut $1-billion in costs as it comes off a “difficult and disappointing” year, when volume, revenue and operating profit declined in all of its business segments, Chief Executive Carol Tome said on a conference call with analysts.
UPS, seen as a bellwether for the global economy, said business conditions are not expected to improve until the second half of 2024. On Tuesday, it forecast full-year revenue in the range of $92-billion to $94.5-billion, below analysts’ estimates of $95.57-billion, based on LSEG data.
The Atlanta-based company is being squeezed by higher labour costs from its new contract with the Teamsters union and declining average daily volume.
It expects to report its lowest consolidated operating margin of the year in the first quarter, Chief Financial Officer Brian Newman said on the analyst call.
UPS expects average daily volume to be weak in the first half of the year before recovering in the latter half. But even then, growth will be constrained.
“The small package market in the U.S., excluding Amazon, is expected to grow by less than 1 per cent,” Tome said told analysts.
Nevertheless, UPS said it has been winning back business that went to rivals like FedEx FDX-N during the company’s tumultuous labour talks that wrapped up last summer. Sixty per cent of that business has returned, Tome said.
Meanwhile, customers are shifting to less lucrative ground-based delivery from air-based services – piling pressure on both UPS and FedEx.
For the fourth quarter, UPS reported a 6.9 per cent decline in revenue from its air-based international segment due to significant softness in Europe and 7.3 per cent decline in its truck-based U.S. business. The company reported quarterly revenue of $24.9-billion, down from $27-billion a year earlier and below analysts’ estimates of $25.43-billion.
Adjusted profit fell to $2.47 per share from $3.62 a year earlier, but came in slightly above analysts’ estimates of $2.46 per share.