UPS reports fourth-quarter gains, outlines strategic moves for 2025

Fourth-quarter earnings released today by Atlanta-based global freight transportation and logistics services provider UPS showed positive results.

Quarterly consolidated revenue, at $25.3 billion, rose 1.5% year-over-year, while adjusted earnings per share, at $2.75, increased 11.3% annually. Consolidated quarterly operating profit, at $2.9 billion, grew 18.1% year-over-year. For the full year of 2024, UPS reported total revenue of $91 billion, marking a modest 0.1% annual gain, though total operating profit of $8.468 billion decreased by 7.4% compared to 2023.

Segment Results for Q4 2024:

• U.S. Domestic Package Revenue: Increased by 2.2% to $17.312 billion, driven by a 2.4% rise in revenue per piece to $12.25. However, average daily package volume was down 0.3%, despite gains in air cargo;
• International Package Revenue: Rose 6.9% annually to $4.923 billion, supported by an 8.8% increase in total daily package volume to 3.727 million. Average revenue per piece fell slightly by 0.4%, to $20.60; and
• Supply Chain Solutions Revenue: Decreased 9.1% annually to $3.086 billion, driven by a drop in revenue following the divestiture of the Coyote subsidiary. UPS stated that this decline was partially offset by growth in air and ocean forwarding.

“Let me start by thanking UPSers for their hard work and efforts as we executed another outstanding Peak Season,” said UPS CEO Carol Tomé during the company’s earnings call earlier today. “For the seventh year in a row, we were the industry leader in on-time service during peak season, the most important time of the year for our customers. Despite a compressed holiday period, our people, enabled by the agility of our integrated network, did what they do best, delivering for our customers.”

Tomé noted that the positive momentum seen in the third quarter carried into the fourth quarter, with reported gains in revenue and operating profit. She added that UPS's U.S. domestic segment saw operating margins increase by more than 10%, reflecting improved revenue quality and strong expense control.

Strategic Moves for 2025: In its earnings release, UPS highlighted several strategic initiatives for 2025. The company outlined its agreement in principle with Amazon to reduce the volume it handles for the e-commerce giant by more than 50% by the second half of the year. Additionally, UPS announced it has fully insourced its UPS SurePost service (an economy ground service for residential deliveries, with USPS handling final-mile delivery) as of January 1, 2025. UPS also revealed plans to reconfigure its U.S. network and roll out multi-year “efficiency reimagined” initiatives, which are expected to result in approximately $1 billion in savings through an end-to-end process redesign.

Regarding the network reconfiguration, Tomé explained that it responds to changes in the U.S. small package market, which is growing slowly and experiencing shifts in package characteristics. She also discussed the challenges posed by the concentration of volume and revenue from Amazon, emphasizing that failing to take action would result in diminishing returns. As for SurePost, Tomé pointed out that UPS’s reliance on the USPS was putting service at risk due to changes in the USPS's operating model. By insourcing the service, she said, UPS can ensure better control and service delivery without significant financial impact.

“In connection with these changes, while I'm incredibly proud of the productivity actions taken by our leaders, we’ve realized we’re not done,” she said. “These significant business and operational changes, coupled with foundational changes we’ve already made, will put us further down the path to becoming a more profitable, agile, and differentiated UPS. We are growing in the best parts of the market, namely healthcare, B2B, SMB, and international. We’ve got work to do to make this happen, but there's no better team than the UPS team. We will deliver.”

UPS CFO Brian Dykes stated on the call that the company's fourth-quarter financial performance exceeded expectations due to a focus on revenue quality and excellent cost management.

“This is a continuation of the momentum from the third quarter, and the first time in three years that we've shown growth in three key metrics—revenue, operating profit, and margin expansion,” he said. “As Carol mentioned, we are taking a set of strategic actions to address the challenges facing our U.S. business head-on. Execution is already underway, and these actions will make UPS more agile and profitable.”

Dykes also confirmed that the decline in Amazon volume had already begun, with expectations that by the second half of 2026, UPS’s Amazon volume will be down by more than 50% compared to the beginning of the year. He added that the pace of volume reduction is five times faster than the effort between 2021 and 2024.

“The results of this change will be lower overall volume, but an improved customer mix and significantly higher revenue per piece,” said Dykes. “We are deliberately shifting our business to focus on higher-yielding volume, and while lower overall volume from Amazon will lead to a drop in revenue in the short term, we expect to grow revenue per piece by shifting our customer mix. Our pricing technology will also help deliver strong base rate improvements in 2025, particularly with our enterprise and SMB customers.”

And CEO Tomé explained that in 2024 Amazon made up 11.8% of total UPS company revenue, adding that, from a competitive perspective, it's important to note that Amazon will remain a customer of UPS when it finishes its accelerated glide down on those areas that are a win for UPS and a win for Amazon.

“Amazon has a one-way network…and we can handle things today that they can't handle,” she said. When you think of [Amazon] as delivering packages, you think of them as a vertically integrated retailer, because that's what they are, ignoring their AWS business, but that's what they are as a vertically integrated retailer who needs some help with with some things, and we're going to provide that help for them in a more nutritive fashion, when we reach the accelerated glide down. This was not their ask. This was us. This was UPS taking control of our destiny. We'll be working with them, of course, on the accelerated glide down, because they've got to figure out how to catch some of this volume. But we are not anticipating changes in the competitive environment as a result.”

In its 2025 forecast, UPS expects consolidated revenue to reach approximately $89.0 billion, with an operating margin of around 10.8%.

Jerry Hempstead, president of Orlando-based Hempstead Consulting, said that while UPS said that its relationship with Amazon did not compensate UPS to its liking, meaning packages that were pretty early in the marriage lost their appeal over time and leadfing to a a period of a trial separation, which may lead to a divorce in the future.

“I believe this is going to force Amazon to build out their network at a faster pace than perhaps it had previously planned,” he said.