01—Abstract
Summary
Summary of the 8-K filed April 23, 2024. Cited figures are marked; the original filing is the authoritative source.
UPS reported first-quarter 2024 results on April 23, 2024 that were weaker year over year but broadly in line with management's expectations.
Consolidated revenue fell 5.3% to $21.7 billiona from $22.9 billion, driven by a 3.6% decline in consolidated average daily volume and lower revenue per piece in Supply Chain Solutions forwarding. GAAP operating profit dropped 36.5% to $1.6 billion, with GAAP operating margin of 7.4% versus an adjusted margin of 8.0%. GAAP diluted EPS was $1.30 and adjusted diluted EPS was $1.43, down 35.0% from $2.20 a year earlier.
The GAAP figures include a $110 millionb (about $0.13 per share) after-tax charge for transformation costs and an impairment tied to consolidating acquired healthcare brands. Segment performance was mixed. U.S. Domestic Package revenue declined 5.0% on a 3.2% drop in average daily volume, and adjusted operating margin was 5.9%.
International revenue fell 6.3%c, with adjusted operating margin of 16.0%. Supply Chain Solutions revenue fell 5.3%, mainly from market rate declines in forwarding, and adjusted operating margin compressed to 7.0%. Management said U.S. average daily volume improved through the quarter and expects a return to volume and revenue growth.
Cash generation was solid, with operating cash flow of $3.3 billiond and free cash flow of $2.3 billion, and adjusted total debt to adjusted EBITDA was 2.11x. Management reaffirmed full-year 2024 guidance: consolidated revenue of $92.0 to $94.5 billion, an adjusted operating margin of 10.0% to 10.6%, and capital expenditures of about $4.5 billion. Investors will likely focus on whether the sequential volume improvement holds and whether the margin recovery required by the reaffirmed guidance is achievable given the first-quarter run rate.
02—Key points
Key Highlights
- Consolidated revenue of $21.7B, down 5.3% YoY; consolidated average daily volume down 3.6%.
- GAAP operating margin of 7.4% and adjusted operating margin of 8.0%; GAAP operating profit down 36.5% to $1.6B.
- GAAP diluted EPS of $1.30 versus $2.19 a year earlier; adjusted diluted EPS of $1.43, down 35.0% from $2.20.
- Segment results: U.S. Domestic revenue down 5.0% (adj. margin 5.9%); International revenue down 6.3% (adj. margin 16.0%); Supply Chain Solutions revenue down 5.3% (adj. margin 7.0%, down from about 7.6% a year earlier).
- $110M after-tax GAAP charge ($0.13/share) for transformation costs and impairment tied to consolidating acquired healthcare brands.
- Free cash flow of $2.28B on $3.3B operating cash flow; adjusted total debt/adjusted EBITDA of 2.11x.
- Full-year 2024 guidance reaffirmed: revenue of $92.0–$94.5B, adjusted operating margin of 10.0–10.6%, and capex of about $4.5B.
03—Questions
Frequently Asked Questions
Why did UPS's first-quarter earnings decline so sharply compared with last year?
Revenue fell 5.3% on lower package volumes, particularly in U.S. Domestic and International, and on weaker forwarding rates in Supply Chain Solutions. Operating costs fell only 1.4%, so margins compressed. Adjusted EPS dropped 35% to $1.43, and GAAP EPS dropped 41% to $1.30 versus the prior year's comparable figures.
What is the difference between GAAP and adjusted results, and how large is it this quarter?
GAAP results include $86M of transformation and other costs and $48M of asset impairment charges, for a total pre-tax effect of $134M, or about $0.13 per diluted share after tax. Adjusted results exclude these items. The gap is modest but matters because the adjusted operating margin of 8.0% is above the GAAP margin of 7.4%.
Did UPS change its full-year 2024 outlook?
No. UPS reaffirmed its full-year targets: consolidated revenue of $92.0–$94.5 billion, an adjusted operating margin of 10.0–10.6%, and capex of about $4.5 billion. Reaching the margin range requires a significant improvement over the first-quarter adjusted margin of 8.0%, which investors may view as a key risk.
Is UPS's balance sheet and cash flow still healthy?
Yes. Operating cash flow was $3.3B and free cash flow was $2.3B for the quarter. Adjusted total debt was $26.3B, or 2.11x adjusted EBITDA on a trailing-twelve-month basis, which is up from 1.65x a year earlier but still a moderate leverage level. Cash and equivalents rose to $4.3B, though short-term debt and commercial paper declined.
What signs point to a recovery in volumes?
Management said U.S. average daily volume improved through the quarter and expects a return to volume and revenue growth. Next Day Air and Deferred volumes still declined year over year, while Logistics revenue grew 9.4%. Investors will watch the second-quarter report to see whether the improvement continues.
04—Continue