UPS Q2 net income drops 32% on lower revenue
UPS lowers full year revenue outlook to $93 billion, stock drops 12%, its worst day on record.
UPS reported a 32 percent drop in net income at $1.4 billion for the second quarter ended June 30, 2024 compared to $2.1 billion in Q22023 on lower income and higher operating expenses.
Revenue declined marginally (one percent) to $21.8 billion compared to $22 billion in the same period last year. Total operating expenses were up three percent at $19.9 billion.
“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," says Carol Tomé, Chief Executive Officer, UPS. "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.”
US domestic segment report higher volumes
UPS reported a 0.7 percent year-on-year growth in domestic volume, the first time since the fourth quarter of 2021. Revenue per piece (RPP), however, declined 2.6 percent. "Base rates increased RPP growth rate ~90 basis points. Combination of product mix, lighter weights and shorter zones decreased RPP growth rate ~310 basis points. The remaining ~40 basis point decline was due to a combination of changes in customer mix and fuel."
Revenue declined 1.9 percent to $14.1 billion while operating profit declined 40 percent to $997 million.
International volume down 3%
International segment revenue declined marginally (one percent) to $4.4 billion, driven by a 2.9 percent decrease in average daily volume.
Operating profit was down eight percent at $824 million.
E-commerce drives supply chain solutions
UPS reported a 2.6 percent increase in revenue for supply chain solutions at $3.3 billion, thanks to strong e-commerce demand in international air freight.
Operating profit was down 28 percent at $243 million.
Other highlights
*Opened the first dedicated healthcare facility in Dublin, Ireland, and increased the size of Roermond, the Netherlands facility and expanded ultra-cold storage capabilities.
*Expanded weekend services to six additional U.S. markets; UPS is the only private U.S.-based carrier that provides commercial and residential pickup and delivery services on Saturdays as a general service offering
*Launched enhancements to UPS Worldwide Economy globally, making it easier to ship non-urgent, cross border shipments
*Increased capacity in Taiwan by 30 percent, and extended pickups to enable customers
to better serve European markets
*Expanded Supply Chain Solutions warehouse space by 25 percent at Frankfurt Airport gateway, a major hub in central Europe
*Network of the Future in the first half of the year: completed 35 operational closures, including five buildings, and on plan to complete additional five operational closures this year; automated driver dispatch process reduced staffing by 26 percent.
*With Smart Package Smart Facility, enabling customers to print RFID labels themselves, and installing RFID readers at customer locations to provide immediate visibility as trailers are loaded."
Lowers 2024 outlook, stock plunges
For 2024, UPS is now expecting consolidated revenue to be approximately $93 billion, capital expenditures of approximately $4 billion, and around $500 million in share repurchases.
UPS has lowered its full year revenue outlook from an earlier estimate of $94.5 billion, and the shares declined 12 percent to $127.68, its worst day on record.
