UPS cost controls shelter profit from softening delivery demand
Reuters
Published Oct 25, 2022 06:04AM ET
Updated Oct 25, 2022 11:52AM ET
By Lisa Baertlein and Shivansh Tiwary
(Reuters) -United Parcel Service Inc on Tuesday reported a stronger-than-expected quarterly adjusted profit and reaffirmed its full-year forecast after higher delivery prices and cost controls offset softening e-commerce demand.
Delivery firms such as UPS and FedEx Corp (NYSE:FDX) are pursuing higher-margin small to large business customers to support volumes and earnings as the COVID-19 pandemic-driven e-commerce bubble deflates and shoppers wrestle with soaring inflation. [Graphic]
After scrambling to keep up with surging e-commerce volume in the early days of the pandemic, Atlanta-based UPS and other delivery providers are now saddled with excess delivery capacity and face the task of predicting demand in a rapidly changing market. Keeping too many planes in the air and delivery trucks on the road fuels excess costs that can quickly sap profits.
"The macro environment is very dynamic, but we are on track to achieving our 2022 financial targets by executing our strategy and controlling what we can," UPS Chief Executive Carol Tomé said in the company earnings release.
Shares in the world's largest parcel delivery firm rose 2.1% at $171.05 in midday trading after the company also reaffirmed its full-year revenue forecast of about $102 billion and adjusted operating margin of around 13.7%.
Rival FedEx last month pulled its annual forecast, citing a sharp global slowdown at the end of August.
"Third-quarter results fit with view that UPS got ahead of the slowing freight cycle and has a better grip on costs than FedEx," Cowen analyst Helane Becker said in a note.
Looking ahead, Tomé and other executives signaled that volume in the critical year-end holiday season would soften due to package limit agreements with Amazon.com (NASDAQ:AMZN), its largest customer. They also expect to be busier in the days leading up to Christmas than last year, when shoppers bought goods early to avoid product shortages.
UPS's adjusted third-quarter profit rose to $2.99 per share, beating Wall Street's estimate of $2.84 per share.
Revenue per piece in its biggest and e-commerce-dependent domestic unit increased 9.8% for the quarter from a year earlier, even as demand weakened.
Get The News You Want
UPS reported third-quarter revenue of $24.2 billion - just missing analysts' estimate of $24.3 billion - as consolidated average daily package volume declined 2.1% to 22.9 million in the quarter.
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.