UPS reports first quarter earnings decline

First quarter earnings results issued this morning by Atlanta-based global freight transportation and logistics services provider UPS were down.

Quarterly consolidated revenue, at $21.7 billion, fell 5.3% annually, and adjusted earnings per share, at $1.43, saw a 35.0% annual decline. Consolidated quarterly operating profit came in at $1.6 billion, which was off 36.5% annually.

“I want to thank all UPSers for their hard work and efforts,” said Carol Tomé, UPS chief executive officer, in a statement. “Our financial performance in the first quarter was in line with our expectations, and average daily volume in the U.S. showed improvement through the quarter. Looking ahead, we expect to return to volume and revenue growth.”

Individual segment results for UPS in Q1 2024:

• U.S. domestic package revenue decreased 5.0%, to $14.2 billion (due to the 3.2% decrease in average daily volume), and average daily package volume was down 3.2% annually, to 18.075 million, with average daily revenue per piece, essentially flat, down 0.3%, to $12.50;
• International Package revenue, at $4.256 billion, was down 6.3% annually (due to the decrease in average daily volume) with average daily volume down 5.8%, to 3.124 million, and average daily revenue per piece, at $20.87, up 2.0%
• (total UPS quarterly average daily volume fell 3.6% annually, to 21,199 million, with average daily revenue per package, down 0.1%, to $13.73); and
• Supply Chain Solutions revenue, at $3.216 billion, fell 5.3% annually, due mainly to market rate declines in forwarding

On the company’s earnings call earlier today, CEO Tomé said that first quarter results turned out as expected, starting with an annual decline in average daily volume (ADV), with the caveat that the rate of decline slowed as the quarter progressed, ending with March ADV down less than 1%, coupled with marked improvement from the fourth quarter to the first quarter.

“This improving performance is primarily due to the efforts of our sales team to win and pull through new volume into our network,” she explained. “Outside of the US, the ADV decline rate also improved sequentially compared to the fourth quarter of last year. And we saw pockets of export growth in certain markets and lanes.”

Addressing the news from earlier this month that UPS has been awarded what it labeled a “significant air cargo contract” by the United States Postal Service (USPS), Tomé said that the USPS air cargo business fits beautifully with UPS’s strategy to grow its B2B offerings, in putting together an innovative and differentiated solution that leverages its integrated network and existing assets.

On the international side, Tomé said UPS is continuing to enhance its network to grow its premium international business, with the most recent example being the launch of next-day flights between Shenzhen, China and Sydney, Australia.

“The addition of these flights enables faster import and export movements between 11 Asian markets in Australia and now exports from Australia can even reach Europe by the next business day,” she explained. “This enhancement further enables us to serve our customers, particularly those that are in high tech manufacturing, and health care, as they are shifting their supply chain in response to changing international trade flows.”

UPS CFO Brian Newman said on the call that that the macroeconomic environment in the first quarter showed improvement in some areas, adding that continued soft demand pressured all three parts of its business.

“Through the quarter, we adjusted our integrated network to match volume levels and drove out expense while maintaining industry leading service levels,” said Newman. “Our overall quarterly performance was in line with our expectations. All three of our segments demonstrated cost agility and on a combined basis drove down expense by $414 million in the first quarter. This enabled us to deliver $1.7 billion in consolidated operating profit and consolidated operating margin was 8%