UPS reported worse-than-expected fourth-quarter revenue Tuesday along with 2024 guidance well below analyst expectations. Meanwhile the package delivery giant also announced it is reducing its workforce by 12,000 as it hiked its quarterly dividend by one penny. UPS stock plummeted.
The company said Tuesday that Q4 revenue totaled $24.92 billion, a 7.8% decrease compared to Q4 2022, while earnings fell 32% to $2.47 per share. Wall Street had expected Q4 EPS of $2.46 with revenue totaling $25.4 billion. The results marked the company's fourth straight quarterly earnings decline, and its sixth missed revenue target.
UPS announced full-year 2023 EPS also dropped 32% to $8.78 with sales declining 9% to $90.96 billion.
Revenue declined 7.3% for UPS' Domestic Package segment, to $16.92 billion. International Package revenue dropped 6.9% to $4.61 billion.
Chief Executive Carol Tomé said in the earnings release that it was a "unique and difficult year" but added that UPS has "remained focused on controlling what we could control, stayed on strategy and strengthened our foundation for future growth."
Tomé added on the earnings call Tuesday there will be 12,000 layoffs in 2024 in an effort to save around $1 billion.
Revenue Below Company Predictions
UPS and FedEx performance and outlook tend to provide on-the-ground readings of economic activity. UPS' results Tuesday contradicted Friday's data from the Bureau of Economic Analysis showing that the U.S. gross domestic product (GDP) expanded by a better-than-expected 3.3% over the final quarter of 2023.
At the end of October 2023, UPS cut its 2023 revenue forecast due to lower e-commerce deliveries demand amid its labor negotiations. The world's biggest package delivery firm expected full-year revenue between $91.3 billion-$92.3 billion, down from its prior forecast of about $93 billion.
During labor talks and even after a deal was reached, customers diverted an average of 1.5 million packages a day – a steeper decline than it previously had forecast – to competitors, UPS executives said at the end of Q3.
However, on Tuesday UPS could not muster enough 2023 sales to hit its own forecast.
UPS also provided initial 2024 guidance Tuesday, with the company expecting revenue to range from approximately $92.0 billion-$94.5 billion. That is below the FactSet target of $95.51 billion for the year. The package delivery giant also forecasts operating margin from about 10.0%-10.6%.
UPS also reported it is increasing its quarterly dividend by one penny to $1.63 and that it plans to return $5.4 billion to shareholders in 2024 through dividend payments. In 2023, UPS returned $7.6 billion to shareowners through dividends and share buybacks.
UPS stock dipped 8.2% to 145.08 Tuesday during market action, making a sharp break below support at the stock's 50-day moving average.
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UPS Earnings: Delivery Woes
The financial report Tuesday from UPS follows FedEx posting fiscal Q2 earnings and revenue results that fell short of expectations last month. FedEx reported EPS of $3.99, with revenue of $22.2 billion. That marked a 25% gain, short of the 32% increase, to $4.19 a share, expected by analysts polled by FactSet. The revenue target was for a 1.9% gain to $$22.36 billion.
Cost cutting measures and possibly cheaper fuel helped boost the shipping leader's operating margin to 6.4%, up from 5.3% a year ago. FedEx earnings rose 32% in its first quarter, the company's first year-over-year increase in five periods.
FedEx also forecast a "low-single-digit percentage decline" in revenue for fiscal 2024, compared to its prior prediction of approximately flat revenue growth. The company also expects fiscal 2024 earnings between $17-$18.50 per share. Wall Street's view is EPS of $17.63.
FDX stock shed 1.7%.
UPS stock has a 33 Composite Rating out of a best-possible 99. Shares also have a 27 Relative Strength Rating and a 60 EPS Rating.
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