Did UPS beat its earnings and what drove the quarter?

UPS reported non-GAAP adjusted diluted EPS of $1.76, up 12.1% from $1.57, and GAAP diluted EPS of $1.80. Growth came from U.S. Domestic Package volume (average daily volume up 6.5%) and Supply Chain Solutions revenue (up 8.0%, driven by air and ocean forwarding and USPS air cargo onboarding), with International Package revenue up 3.4%. The release does not provide consensus estimates, so beat/miss versus expectations cannot be determined from this filing alone.

How much did the Coyote Logistics sale affect results?

The divestiture produced a pre-tax gain of $156 million (about $152 million after tax, or roughly $0.18 per diluted share), which lifted GAAP results. Coyote's expected revenue and profit had been included in prior targets, so UPS removed them from its full-year outlook. Investors should treat the gain as non-recurring and focus on the adjusted figures for underlying performance.

What changed in the full-year 2024 outlook?

UPS now expects consolidated revenue of about $91.1 billion and a non-GAAP adjusted operating margin of about 9.6%. The revenue target reflects actual Q3 results, the removal of Coyote, and the Q4 outlook. The company also projects capital expenditures of about $4.0 billion and dividend payments of about $5.4 billion, subject to Board approval. Management did not provide quarterly or EPS guidance in this filing.

Is UPS's underlying profitability recovering, and what are the risks?

Adjusted operating margin improved to 8.9% in Q3 from 7.7%, and U.S. Domestic margins expanded, which supports management's view of a return to growth. However, nine-month GAAP net income fell 20.4% and adjusted operating profit fell 18.2%, Supply Chain Solutions margins compressed year over year, and the company is still executing transformation and workforce reduction programs. Free cash flow also declined year to date. Investors should monitor whether margin gains hold through the peak season and whether restructuring costs continue to fall.

UPS 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed October 24, 2024. Cited figures are marked; the original filing is the authoritative source.

UPS reported third-quarter 2024 consolidated revenue of $22.2 billion^a, up 5.6% year over year, with GAAP operating profit of $1.985 billion (up 47.8%) and GAAP diluted EPS of $1.80 (up from $1.31).

On a non-GAAP adjusted basis, operating profit rose 22.8% to $1.983 billion^b, the adjusted operating margin was 8.9% (versus 7.7% a year earlier), and adjusted diluted EPS was $1.76, up 12.1%. The GAAP results include a $156 million pre-tax gain on the divestiture of Coyote Logistics, partly offset by $154 million of transformation strategy costs, so the net one-time benefit to EPS was roughly $0.04. Growth was led by Supply Chain Solutions (revenue up 8.0%) and U.S. Domestic Package (revenue up 5.8%, driven by a 6.5% increase in average daily volume), while International Package revenue grew 3.4%.

Management described the quarter as a return to revenue and profit growth following a challenging 18-month period. The company raised its full-year 2024 consolidated revenue target to approximately $91.1 billion^c and lifted its non-GAAP adjusted operating margin expectation to approximately 9.6%. Guidance reflects the completed Coyote disposition, which removes revenue and profit that had been in prior targets.

Capital expenditures are expected to be about $4.0 billion^d and dividend payments about $5.4 billion, subject to Board approval. Investors should weigh the improved top-line and margin trends against several cautions. Nine-month GAAP net income fell 20.4% and nine-month adjusted operating profit fell 18.2%, so year-to-date results remain well below 2023.

U.S. Domestic Package operating margin was still below prior-year levels on a nine-month basis, and the company continues to execute transformation programs and the Fit to Serve workforce reduction of roughly 12,000 positions through 2024, with the scope under evaluation. Free cash flow for the first nine months was $4.0 billion, down from $4.9 billion, reflecting lower operating cash flow.

02—Key points

Key Highlights

Q3 2024 consolidated revenue of $22.2B, up 5.6% YoY, with volume growth of 5.4% in average daily packages.
GAAP diluted EPS of $1.80 vs. $1.31 a year ago; non-GAAP adjusted diluted EPS of $1.76, up 12.1%, and including a $156M pre-tax Coyote divestiture gain that was largely offset by $154M of transformation costs.
Adjusted operating margin of 8.9% vs. 7.7% in Q3 2023, with U.S. Domestic adjusted operating margin at 6.7% (vs. 4.9%) and Supply Chain Solutions adjusted margin at 6.4% (vs. 8.8%, down on the lower-margin mix and absence of Coyote).
Full-year 2024 revenue target raised to about $91.1B and non-GAAP adjusted operating margin expectation lifted to about 9.6%, after accounting for the completed Coyote disposition.
Nine-month GAAP net income of $4.06B, down 20.4%, and adjusted operating profit down 18.2%, showing year-to-date profitability still well below 2023 levels.
Nine-month free cash flow of $4.04B vs. $4.89B a year earlier; capex of about $4.0B expected for full-year 2024 and dividends of about $5.4B subject to Board approval.
Ongoing transformation and Fit to Serve initiatives (about 12,000 positions targeted through 2024) continue, with transformation costs of $154M in the quarter and the scope of Fit to Serve under evaluation.

03—Questions

Frequently Asked Questions

Did UPS beat its earnings and what drove the quarter?
UPS reported non-GAAP adjusted diluted EPS of $1.76, up 12.1% from $1.57, and GAAP diluted EPS of $1.80. Growth came from U.S. Domestic Package volume (average daily volume up 6.5%) and Supply Chain Solutions revenue (up 8.0%, driven by air and ocean forwarding and USPS air cargo onboarding), with International Package revenue up 3.4%. The release does not provide consensus estimates, so beat/miss versus expectations cannot be determined from this filing alone.
How much did the Coyote Logistics sale affect results?
The divestiture produced a pre-tax gain of $156 million (about $152 million after tax, or roughly $0.18 per diluted share), which lifted GAAP results. Coyote's expected revenue and profit had been included in prior targets, so UPS removed them from its full-year outlook. Investors should treat the gain as non-recurring and focus on the adjusted figures for underlying performance.
What changed in the full-year 2024 outlook?
UPS now expects consolidated revenue of about $91.1 billion and a non-GAAP adjusted operating margin of about 9.6%. The revenue target reflects actual Q3 results, the removal of Coyote, and the Q4 outlook. The company also projects capital expenditures of about $4.0 billion and dividend payments of about $5.4 billion, subject to Board approval. Management did not provide quarterly or EPS guidance in this filing.
Is UPS's underlying profitability recovering, and what are the risks?
Adjusted operating margin improved to 8.9% in Q3 from 7.7%, and U.S. Domestic margins expanded, which supports management's view of a return to growth. However, nine-month GAAP net income fell 20.4% and adjusted operating profit fell 18.2%, Supply Chain Solutions margins compressed year over year, and the company is still executing transformation and workforce reduction programs. Free cash flow also declined year to date. Investors should monitor whether margin gains hold through the peak season and whether restructuring costs continue to fall.

04—Continue

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