Sandy Springs-based UPS reported $1.4 billion in net income for the second quarter, down 32% year-over-year — but CEO Carol Tome pledged the company will grow operating profit in the future.
“This quarter was a significant turning point for our company, as we returned to volume growth in the U.S., the first time in nine quarters,” Tome said in a written statement Tuesday.
She acknowledged that operating profit declined year over year for the first half of 2024 and said: “Going forward we expect to return to operating profit growth.”
UPS reported average daily package volume growth of just 0.1% for the quarter, including 0.7% growth for U.S. domestic packages, though its average revenue per piece declined 1.7%.
UPS stock was the worst performer in the S&P 500 on Tuesday, falling about 12%.
The company is a global bellwether for the economy. Since last year when the threat of a Teamsters strike against UPS caused the company to lose business, UPS has been working to win back customers and bring on new business. Rival FedEx posted strong quarterly results in June.
Businesses have been moving toward lower-cost shipping options, such as ground instead of air shipments, according to Tome.
Total revenue declined 1.1% to $21.8 billion for the quarter that ended July 30, down from $22.1 billion in the same period a year ago.
Quarterly operating expenses grew 3.1%, to $19.9 billion from $19.3 billion.
Tome’s comments on volume growth prompted questioning during an investor conference call about whether the company was shifting from its “better not bigger” strategy, prioritizing higher-margin business rather than pure expansion.
Tome responded: “We’re not chasing volume.”
“It’s just (that new customers’) demand was much higher than we had anticipated,” she said. “We’re laser-focused on focusing on the segments of the market that value our end-to-end network. ‘Better not bigger’ as not gone away.”
UPS has been cutting costs by closing some of its buildings and reducing staffing by moving toward more automation in areas like the dispatch of drivers. In June, the company announced the sale of its Coyote Logistics freight brokerage unit for $1.025 billion.
UPS on Monday evening announced a deal to acquire Mexican express delivery company Estafeta, saying the move is part of its strategy to become “the world’s premium international small package and logistics provider.” The company did not disclose the value of the acquisition, which is expected to close by the end of this year subject to closing conditions and regulatory approvals.
“As the shift to nearshoring continues, our combined business will give customers in Mexico unprecedented access to global markets with seamless service and greater efficiency,” Tome said in a written statement.
UPS also updated its forecasts for 2024, saying it expects consolidated revenue of $93 billion, compared with its April estimate of $92 billion to $94.5 billion for the year.
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