Shares of United Parcel Service Inc. dove to a more than three-year low Thursday, after the package delivery giant missed revenue expectations and cut its full-year outlook, again, due to labor distractions and concerns over economic growth.
“The global macro environment remained weak with some countries in recession, which pressured international and freight forwarding volume,” said Chief Executive Carol Tomé on the post-earnings conference call with analysts, according to an AlphaSense transcript. “And in the US labor uncertainty negatively impacted volume for most of the quarter.”
The stock
UPS,
slid 4.9% in midday trading, putting it on track for the lowest close since July 29, 2020. The stock has dropped 10.4% so far in October, which would be the worst monthly performance since it tumbled 17% in September 2022.
Net income fell to $1.13 billion, or $1.31 a share, from $2.58 billion, or $2.96 a share, in the same period a year ago. Excluding nonrecurring items, adjusted earnings per share of $1.57 beat the FactSet consensus of $1.52.
Revenue fell 12.8% to $21.1 billion, below the FactSet consensus of $21.40 billion, to mark the fifth-straight quarterly revenue miss.
Domestic package revenue declined 11.1% to $13.66 billion, to miss expectations of $13.74 billion, as results were hurt by labor negotiations, higher costs and economic uncertainty. Average daily volume fell 11.5%, while revenue per piece increased 2.0%.
Also read: UPS blames ‘late and loud’ Teamsters talks for [Q2] revenue miss, outlook cut.
International package revenue was down 11.1% to $4.27 billion, just below the FactSet consensus of $4.29 billion, and supply-chain and freight revenue fell 21.4% to $3.13 billion, below expectations of $3.37 billion.
Operating expenses declined but less than revenue, down 6.3% to $19.72 billion. Compensation and benefits expense increased to 0.3% to $11.53 billion, as total union wage rates rose 11.5% due to the wage increases that went into effect on Aug. 1.
Tomé said UPS was preparing for the “peak” season in the fourth quarter, and she still expects to have “healthy peak volume.” She said the company plans to hire over 100,000 seasonal employees for the holidays, the same as last year.
For 2023, the company cut its revenue outlook to between $91.3 billion and $92.3 billion from about $93 billion, “primarily to reflect global macroeconomic uncertainty.” The current FactSet consensus is $92.87 billion.
UPS had cut its full-year revenue outlook in August to $93 billion from guidance provided in April of around $97 billion, which was down from guidance provided in January of between $97.0 billion and $99.4 billion.
UPS affirmed its 2023 dividend payment expectations of around $5.4 billion, but cut its expectation for share repurchases to “approximately” $2.25 billion from “around” $3 billion.
The stock has tumbled 24.3% over the past three months, while rival FedEx Corp. shares
FDX,
have slid 15.2% and the S&P 500 index
SPX
has declined 9%.
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