UPS reports Q2 revenue decline, while U.S. volumes return to growth

Second quarter earnings results issued earlier today by Atlanta-based global freight transportation and logistics services provider UPS saw declines.

Quarterly consolidated revenue, at $21.8 billion, fell 1.1% annually, and adjusted earnings per share, at $1.79, saw a 30% annual decline. Consolidated quarterly operating profit came in at $1.9 billion, which was off 30% annually.

“I want to thank all UPSers for their hard work and efforts in the second quarter,” said Carol Tomé, UPS chief executive officer, in a statement. “This quarter was a significant turning point for our company as we returned to volume growth in the U.S., the first time in nine quarters. As expected, our operating profit declined in the first half of 2024 from what we reported last year. Going forward we expect to return to operating profit growth.”

Individual segment results for UPS in Q2 2024:

• U.S. domestic package revenue decreased 1.9%, to $14.1 billion (due to the 2.6% decrease in revenue per piece related mainly to changes in product mix), and average daily package volume was up 0.7% annually, to 17 million, with average daily revenue per piece down 2.6%, to $12.35;
• International Package revenue, at $4.37 billion, was down 1.0% annually (due to the 2.9% decrease in average daily volume) with average daily volume down 2.9%, to 3.069 million, and average daily revenue per piece, at $21.42, up 2.4%; and
• Supply Chain Solutions revenue, at $3.329 billion, increased 2.6% annually, due to growth in logistics, including healthcare

On a conference call this morning, CEO Tomé noted that at the beginning of 2024, UPS shared its outlook based on various key planning assumptions, including acknowledging the front loading of costs associated with its new labor contract with the Teamsters, which she said UPS believed would cause its financial performance to reflect what she called a backup effect, with first half 2024 earnings down as much as 30% and second half earnings returning to growth. In the first half of the year, UPS’s earnings were in line with the down 30% scenario, she said.

Other assumptions cited by Tomé included: UPS returning to volume growth, which it achieved in the U.S. in May, and while international growth was down 2.9% annually, she said that UPS saw growth in certain markets; UPS’s fit-to-serve initiative to right-size its management structure, with the company on track to deliver roughly $1 billion in savings by the end of the year; and exploring strategic options for its Coyote brokerage unit, which lead to a pending sale to RXO.

“So, the key assumptions we use to build our plan are holding with one distinction, and that's U.S. volume mix, both in terms of product and customer segmentation,” she said. “During the quarter, we experienced a shift toward value products, with shippers choosing ground over air and SurePost over ground. And there was also a notable shift in product characteristics, with a surge in lightweight, short-zone volume moving into our network.”

UPS CFO Brian Dykes said on the call, his first as the company’s new CFO, that UPS’s second quarter results represented an important turning point for business, with U.S. volume reflecting positively and also the last quarter of the high-wage growth rate associated with its new Teamsters contract.

Outside of the U.S., he said UPS saw pockets of demand improve in each export region, in turn, driving growth in many of its more profitable lanes. And through the company’s fit-to-serve initiative, he said UPS reduced its workforce by more than 11,500 positions, which equates to around $350 million in savings for the first half of 2024, with UPS.

With second quarter U.S. volumes turning positive for the first time since the fourth quarter of 2021, and when compared to the first quarter of 2024, he said that average daily volume year-over-year growth rate increased by 390 basis points.

“At the beginning of the year, we expected to see three things in the second quarter: volume growth, growth in B2C, and relatively consistent product mix to what we had experienced last year,” he said. “We saw strong volume growth in the second quarter, led by B2C. It came with a different product mix. For the quarter, B2C volume increased 4.8% year-over-year, and made up 58.5% of our volume, an increase of 220 basis points from a year ago. This growth was driven in large part by several new e-commerce customers that entered our network. B2B average daily volume finished down 4.6% but returns remained a bright spot and increased 3% year-over-year. From a product perspective, we saw customers trade down between services. Specifically, we saw customers shift from air to ground and from ground to SurePost. As a result, total air average daily volume was down 7.8% and Ground average daily volume increased 2.3%.”

And within its Ground offering, he said SurePost average daily volume grew 25%, driven by new shippers’ product choices, product trade-downs, and easier comparisons, due to last year’s decline in volume during its contract negotiation with the Teamsters.