UPS pointing downwards over past quarter


UPS’ most recent numbers add to a sense of falling demand across not just air express, but other markets too. For the first quarter 2024, revenue fell 5.3% year-on-year to US$21.7bn whilst ‘adjusted’ operating profit was down 31.5% at $1.74bn.

The problem at the core US Domestic express business was falling volumes. Average daily volume fell 3.2% compared to the same period last year. It is notable that ‘business-to-business’ volumes fell 5.5%, a segment that over 2023 had been quite robust in the face of declining e-commerce-driven ‘business-to-consumer’ volumes. Even though UPS commented that rates, measured in ‘revenue per piece’, were “relatively flat” revenue still fell by 5%, something possibly influenced by a changing mix of business.

‘International’ volumes also fell, by 8.1% average daily volume, whilst within that segment export volumes fell by 3.6%. However, rates edged up by 2% resulting in revenue falling by just 6.3%. Yet it is not clear why profits fell by 15.4% year-on-year.

Things were not particularly happy at the ‘Supply Chain Solutions’ business either. Revenue fell by 5.3% year-on-year and ‘adjusted’ operating profit was down 12.4%. UPS blamed the state of both the air and sea freight markets for poor results at the freight forwarding operation, whilst the “truckload brokerage unit continued to face soft demand and market rate pressures”. The exception, as usual, was the contract logistics business which “delivered revenue growth and increased operating profit driven by gains in healthcare”, with a growth rate of 9.4%.

The statement around these results from UPS’ CEO Carol Tomé, was quite muted, saying that the company’s “financial performance in the first quarter was in line with our expectations, and average daily volume in the U.S. showed improvement through the quarter. Looking ahead, we expect to return to volume and revenue growth”. UPS’ short-term trajectory for the past few quarters has been low growth, something it shares with much of the air express sector. However, it might be noted that parts of the air freight and e-commerce sector are experiencing a mini-boom at present, particularly on the trans-Pacific routes, yet UPS is apparently not benefitting from this.

Author: Thomas Cullen

Source: Ti Insight

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