UPS fell short of Wall Street revenue estimates on Tuesday, revealing declines in both international and domestic shipping volumes in its fourth-quarter earnings report. As part of a strategic realignment for 2024, the company also announced 12,000 job cuts.
During a company earnings call, CEO Carol Tomé stated that the workforce reductions would result in approximately $1 billion in cost savings for UPS. However, this move caused the package giant’s shares to drop more than 8%.
Comparing UPS’ performance to Wall Street estimates, adjusted earnings were $2.47 per share, slightly surpassing the expected $2.46, as reported by LSEG (formerly known as Refinitiv). However, revenue fell short at $24.92 billion, compared to the expected $25.43 billion.
For the last quarter of 2023, UPS reported a net income of $1.61 billion, or $1.87 per share, reflecting a significant decline from $3.45 billion, or $3.96 per share, in the same period a year earlier. Adjusting for one-time items related to pensions and intangible assets, UPS earned $2.47 per share. The company’s revenue declined by 7.8% to $24.9 billion from $27 billion the previous year.
The report highlighted a 7.4% decrease in average daily volume domestically and an 8.3% drop internationally. Tomé attributed the international challenges to softness, particularly in Europe, along with freight complications in the Red Sea region, Panama, and Suez canals.
While the earnings report did not explicitly address financial impacts from August’s negotiations with the Teamsters over labor contracts, Tomé mentioned these talks and the broader macroeconomic environment as contributors to the “disappointing” year.
Additionally, UPS disclosed plans to explore the sale of its Coyote truck brokerage business, described by Tomé as a “highly cyclical” venture with “considerable earnings volatility.” The CEO also stated that the company intends to request employees to return to the office five days a week in 2024.
Looking ahead to 2024, UPS projects revenue between $92 billion and $94.5 billion, with an adjusted operating margin ranging from approximately 10% to 10.6%.