10-QPeriod: Q1 FY2024

UNITED PARCEL SERVICE INC Quarterly Report for Q1 Ended Mar 31, 2024

Filed May 3, 2024For Securities:UPS

Summary

United Parcel Service, Inc. (UPS) reported a challenging first quarter for 2024, with a notable decline in revenue and net income compared to the prior year. Revenue decreased by 5.3% to $21.7 billion, driven by soft demand across its global operations, particularly in the U.S. Domestic Package and International Package segments. This decline was attributed to macroeconomic headwinds, including persistent soft demand and inflationary pressures. Despite a reduction in operating expenses by 1.4%, largely due to lower purchased transportation and fuel costs, the revenue decline outpaced expense reductions, resulting in a significant drop in operating profit by 36.5% to $1.6 billion. Net income fell by 41.3% to $1.1 billion, and diluted earnings per share decreased to $1.30 from $2.19 in the prior year. Management highlighted ongoing investments in its "fit to serve" initiative and network transformation, including efforts to right-size the business and enhance responsiveness to market dynamics. The company anticipates a return to operating profit growth in the second half of 2024.

Financial Highlights

52 data points
Beta

Revenue

$21.71B

Net Income

$1.11B

5.1% Net Margin

EPS (Diluted)

$1.30

Total Assets

$67.63B

Cash & Equivalents

$4.37B

Free Cash Flow

$2.28B

Financial Statements
Beta
Revenue$21.71B
Operating Expenses$20.09B
Operating Income$1.61B
Interest Expense$195.00M
Net Income$1.11B
EPS (Basic)$1.30
EPS (Diluted)$1.30
Shares Outstanding (Basic)856.00M
Shares Outstanding (Diluted)857.00M

Key Highlights

  • 1Revenue declined 5.3% to $21.7 billion in Q1 2024 compared to Q1 2023, attributed to soft demand and macroeconomic challenges.
  • 2Operating profit saw a significant decrease of 36.5% to $1.6 billion, primarily due to revenue declines outpacing operating expense reductions.
  • 3Net income fell 41.3% to $1.1 billion, with diluted Earnings Per Share (EPS) dropping to $1.30.
  • 4Average daily package volume across all segments decreased by 3.6%, reflecting weaker demand in both commercial and residential shipments.
  • 5Operating expenses decreased by 1.4% due to reduced purchased transportation and fuel costs, as well as ongoing productivity initiatives.
  • 6The company is actively managing transformation costs, including workforce reductions, and has recorded asset impairment charges.
  • 7UPS announced a significant agreement to become the U.S. Postal Service's primary air cargo provider within the United States, effective April 1, 2024.

Frequently Asked Questions

The primary driver for the decrease in revenue was a decline in average daily package volume across all segments, influenced by challenging macroeconomic conditions, including soft demand and inflationary pressures. This was compounded by relatively flat revenue per piece, which saw a slight decrease overall.

Operating expenses decreased by 1.4%. This reduction was primarily driven by lower purchased transportation costs and fuel expenses due to decreased volumes and lower commodity prices. Ongoing productivity initiatives also contributed to expense control.

UPS anticipates its second-quarter earnings to be lower relative to 2023, largely due to higher labor costs from the new Teamsters contract. However, the company expects a return to operating profit growth in the second half of 2024, supported by ongoing network investments and transformation initiatives.

The agreement, effective April 1, 2024, designates UPS as the U.S. Postal Service's primary air cargo provider within the United States. This is expected to bring additional air cargo volumes to UPS, impacting revenue and expenses in the Supply Chain Solutions segment starting in the second quarter.