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UPS Stock Slides After Q2 Earnings Beat, Revenue-Per-Parcel Surge

Updated at 1:57 pm EST

United Parcel Service  (UPS Get United Parcel Service Inc. Report posted better-than-expected second earnings Tuesday, and repeated its profit guidance, thanks in part to a big leap in the price of domestic parcel revenues.

The stock was pressured in early trading, however, after the parcel delivery group said domestic volumes would continue to decline over the first half of the year, amid surging fuel and transport costs, before improving into six months ending in December.

UPS said earnings for the three months ending in June were pegged at $3.25 per share, up 6.3% from the same period last year and firmly ahead of the Street consensus forecast of $3.15 per share. Group revenues, the company said, rose 5.9% to $24.8 billion, again topping estimates of a $24.6 billion tally.

Domestic segment revenues rose 7.4% to $15.46 billion, UPS said, powered in party by an 11.9% boost in revenue-per-piece, a key industry metric. International revenues were up 5.6% to $5.07 billion while supply chain solutions sales were essentially flat at $4.24 billion.

Looking into the current calendar year, UPS reaffirmed its guidance for revenues of more than $102 billion and earnings in the region of $14 billion, but indicated that volumes from its contract with Amazon  (AMZN Get Amazon.com Inc. Report, UPS' biggest customer, would likely form a smaller portion of its overall topline by the end of the year. . 

“I want to thank UPSers around the world for delivering outstanding service to our customers,” said CEO Carol Tomé. “While the external environment is ever changing, our better not bigger strategic framework has fundamentally improved nearly every aspect of our business, enabling greater agility and strong financial performance.”  

UPS shares were marked 3.8% lower in early afternoon trading following the earnings release to change hands at $180.72 each.

Late last month, UPS's rival FedEx  (FDX Get FedEx Corporation Report cautioned that profit margins in its workhorse ground transportation division would expand at a slower rate over the coming year amid a surge in fuel and input costs.

FedEx posted better-than-expected profits for its fiscal fourth quarter, which ended in May, noting that it passed on rising fuel costs to customers that allowed for improved margins in its key ground shipping unit. Group revenues, FedEx said, rose 8.1% from last year to $24.4 billion, narrowly topping analysts' estimates of a $24.05 billion tally.

Looking into the group's coming fiscal year, which ends in February of 2023, FedEx said it sees earnings in the region of $22.45 to $24.45 per share, well ahead of Refinitiv forecasts, adding it expects to repurchase around $1.5 billion of stock over the final six months of the coming financial year.

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