Latest news with #UPS
Yahoo
6 hours ago
- Business
- Yahoo
UPS China-to-US Shipments Decline More than Expected in Q2
UPS saw sinking volumes, revenue and income in a quarter that weighed heavily on market dynamics for parcel shipping—namely smaller packages. In an earnings call Tuesday morning, CEO Carol Tomé said U.S. consumer sentiment that was 'near historic lows' during the quarter unfavorably impacted the small package market. The CEO said the ongoing tariff situation caused consumers to start trading down in certain categories. More from Sourcing Journal Trump Issues Executive Order Ending De Minimis Exemption Trump Slaps India, a 'Friend' to the US, With 25% Tariffs Trump Administration's DOJ Primed to Tackle Tariff Evasion With New Unit 'Consumers are trading down, while at the same time, splurging,' Tomé said, referring to recent research from McKinsey, in which one-third of consumers traded down in one category to afford something in another. 'For the first time in three years, consumer spending on discretionary categories like restaurants and automobiles outpaced growth in essential items.' Tomé also said that American manufacturing activity 'remained soft,' further impacting market demand. U.S. average daily volumes declined 7.3 percent in the quarter to 16.6 million packages, weighing down the wider global volume decrease of 5.7 percent to 19.7 million. America's largest package delivery firm saw its stock plummet more than 10 percent Tuesday after the earnings report was released, with the company pulling its revenue and operating profit guidance for 2025. 'There's so much uncertainty out there. We are building scenarios and the range of the scenarios, well it's wide enough to drive one of our 18 wheelers through,' Tomé said. She noted that July volumes are 'better than what we've been seeing' but that it is not clear if it was just impacted by Amazon Prime Day and other retail promotions. Additionally, Tomé pointed to inventory purchases ahead of the Aug. 1 tariff deadline, and the uncertainty related to the Aug. 12 China tariff negotiation deadline, as factors preventing the company from providing guidance. 'There's uncertainty around tariffs and then there means there's uncertainty around consumer demand. So consider this, at the end of the first quarter, our customers had inventory and they sold that inventory down in the second quarter. They're now at a point where they need to replenish their inventories,' said Tomé. 'We just don't know.' UPS second quarter sales declined 2.7 percent to $21.2 billion and net income came it at $1.3 billion. However, the company saw just a 0.8 percent revenue dip in the U.S. despite the 7.3 percent volume decline in a sign that it is increasing revenue per piece in its network. This comes as the company phases Amazon shipments out of its ecosystem in an effort to generate more of a profit from its deliveries. These Amazon 'glide down' efforts have been going as planned, with chief financial officer Brian Dykes saying average daily volumes are expected to contract 30 percent in the second half year over year. In the third quarter, UPS expects to pull 500,000 Amazon parcels out of its network. Despite the soft overall parcel market, Tomé said UPS gained share in parcel delivery, even as smaller last-mile delivery carriers like LaserShip and SpeedX have expanded their business. Internationally, U.S. trade policy shifts cut into UPS' most profitable trade lane in the second quarter, with average volumes from China to the U.S. declining 34.8 percent in the May and June from year-ago totals. This is largely due to the acceleration of China tariffs to as much as 145 percent and the elimination of the duty-free de minimis provision to kick off May, further pressuring volumes for smaller parcels that used to qualify for the trade exemption. Dykes said the China-to-U.S. trade lane 'declined more than what we expected.' But the logistics giant was able to recoup some of that movement with volumes increasing 22.4 percent from China to the rest of the world. Tomé said the company doubled its capacity between India and Europe. In total, international package volume increased 3.9 percent to 3.2 million parcels as units out of Southeast Asian countries like Vietnam and Malaysia saw 20 percent growth. In a preview of the holiday season, Tomé said UPS customers have not yet submitted their peak plans, which is an indication that they are having difficulty in forecasting demand for the final two months of the year. 'We have about 100 customers that drive 80 percent of the surge during peak. Ordinarily, we don't get peak plans until the August and then final plans the September. I think they're going to be pushing them more into September as they're working through their plans,' said Tomé. 'In my conversations with CEOs, no one's telling me they're not going to have a peak. But they're not in a position to dimensionalize that for us.' Tomé also revealed that participating drivers in the voluntary separation program will begin leaving the company in August. The buyout program is part of the wider $3.5 billion in cost savings UPS is on track to achieve in 2025 as part of its network reconfiguration. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Globe and Mail
12 hours ago
- Business
- Globe and Mail
How Should Investors Approach UPS Stock Post Q2 Earnings Miss?
Shares of United Parcel Service UPS plunged 10.57% to close July 29's trading session at $90.84. The double-digit decline followed the transportation giant's earnings miss and year-over-year decline in the second quarter of 2025. Although revenues exceeded expectations, they declined year over year. Adding to the woes, the company refrained from providing full-year guidance for revenues or operating profit due to the ongoing macro uncertainty. Following the substantial stock price decline on July 29, the question is whether investors should remain invested in UPS stock or book profits and exit. Let's address this question by evaluating the company's latest quarterly performance and long-term prospects in detail. UPS' Q2 Earnings Snapshot UPS' second-quarter 2025 earnings per share of $1.55 missed the Zacks Consensus Estimate by a penny and declined 13.4% year over year. Revenues of $21.2 billion surpassed the Zacks Consensus Estimate of $20.8 billion but decreased 2.7% year over year. Results were hurt by sinking volumes. On the conference call, CEO Carol Tomé said U.S. consumer sentiment, which was near historic lows during the quarter, hurt the small package market. The CEO further said the ongoing tariff situation caused consumers to start trading down in certain categories. UPS expects capital expenditures for 2025 to be around $3.5 billion. Is UPS' Overall Share Performance Just as Disappointing? The answer to the above question is, unfortunately, yes. Shares of United Parcel Service have plunged 28% year to date compared with its Zacks Transportation—Air Freight and Cargo industry's 16% decline. Rival FedEx 's FDX price performance is better than that of UPS. YTD Price Comparison Longer-term, over the past year, too, UPS shares have performed worse than its industry and FedEx. While UPS has plunged in excess of 30%, its industry and FedEx have declined 21% and 22%, respectively, in a year. Factors Hurting UPS Stock Demand Slowdown: A Grave Concern: Due to the decline in shipping demand, volumes are being hurt. Lackluster volumes have been hurting United Parcel Service's results. The slowdown in online sales in the United States, apart from the softness of global manufacturing activity, has been hurting the demand scenario. Average daily volumes on a consolidated basis have declined 3.8% year over year in the first half of 2025. Economic Uncertainty & Tariff Concerns: Of late, U.S. markets have been characterized by a high degree of volatility amid uncertainty surrounding U.S. trade policy and growing anxiety about a slowing U.S. economy. Volatility is likely to persist in the U.S. stock market going forward due to uncertainty over the timing of the next interest rate cut, new tariffs and ongoing geopolitical tensions. UPS Hikes Dividend: But is it Sustainable? In February, UPS management announced a 0.6% hike in its quarterly dividend payout to $1.64 per share (annualized $6.56 per share). No doubt this represents UPS' shareholder-friendly approach, but questions about the sustainability of its dividend arise. United Parcel Service's elevated dividend payout ratio (the percentage of net income paid out as dividends) of 84% highlights the concern associated with its ability to maintain dividend payouts over the long term. We remind investors that in the early 2020s, when UPS' business was flourishing, driven by exponential e-commerce growth during the peak pandemic period, the company made huge dividend payments. Free cash flow has been on a decline since touching a high of $9 billion in 2022. Currently, UPS' elevated dividend payout is hurting its operational flexibility, with free cash flow barely covering the dividend. At 2024-end, free cash flow was $6.3 billion, not much above its dividend payments of $5.4 billion. Dividend payments are expected to be roughly $5.5 billion. Unfavorable Earnings Estimates Movement: The Zacks Consensus Estimate for 2025 adjusted earnings for UPS is currently pegged at $7.03 per share, indicating an 8.9% year-over-year decline. The consensus mark for 2025 revenues suggests a 4.1% decline from 2024 actuals. The Zacks Consensus Estimate for 2025 earnings has been revised 0.7% downward over the past 60 days. UPS' Valuation: A Saving Grace UPS is currently considered relatively undervalued, trading at a forward 12-month price to earnings (P/E) of 11.99X. This figure is lower than its industry average of 13.2X. It is also lower than that of FedEx. UPS currently has a Value Score of B. UPS' P/E F12M vs. Industry & FDX Don't Buy UPS Now: Near-Term Headwinds Are Hard to Ignore Agreed that UPS' valuation is attractive. Moreover, United Parcel Service's expansion efforts look good. In a bid to expand its network, UPS acquired Estafeta, a Mexican express delivery company. The company's cost containment efforts are also aimed at driving long-term growth. As part of this exercise, UPS is offering buyouts to delivery drivers for the first time in its 117-year history. United Parcel Service's full-time drivers are eligible for this offer. The company aims to trim its workforce by 20,000 this year, representing approximately 4% of the global workforce, and shut 73 facilities to streamline operations and lower labor costs. Apart from the tariff-induced economic uncertainties, UPS' decision to reduce business with its largest customer, Amazon AMZN, contributed to the decision to trim the workforce. Earlier in the year, UPS management reached an agreement in principle with Amazon to lower the latter's volume by more than 50% by June 2026. According to Carol Tome, Amazon was not its most profitable customer. However, near-term risks outweigh the positives. Tariff-related uncertainty, concerns related to dividend sustainability, and volume woes represent major headwinds. Declining earnings estimates do not help matters. Given these challenges, buying the stock, despite the significant price decline, seems premature now. We believe investors should steer clear of this stock, which currently carries a Zacks Rank #4 (Sell). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here. #1 Semiconductor Stock to Buy (Not NVDA) The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow. One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be. See This Stock Now for Free >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report United Parcel Service, Inc. (UPS): Free Stock Analysis Report FedEx Corporation (FDX): Free Stock Analysis Report
Yahoo
14 hours ago
- Business
- Yahoo
UPS's lead over FedEx in market value shrinks to narrowest ever
(Bloomberg) — United Parcel Service Inc.'s (UPS) once-towering lead over rival FedEx Corp. in market valuation has shrunk to the smallest ever after a 29% plunge in UPS shares this year. The Atlanta-based company is struggling to manage high costs and improve volume amid uncertain trade policies. It did not provide revenue or operating profit guidance for 2025 when it reported second-quarter earnings Tuesday. UPS' market capitalization was $21.2 billion higher than FedEx after a sharp selloff following the results that has extended into Wednesday trading, which is the smallest difference since UPS went public in 1999. At its widest level in 2022, the gap was about $135 billion — higher than the combined value of both companies today. Shares of both parcel couriers have been volatile in recent years as the rise of online commerce upends the delivery business, and US President Donald Trump's trade war has ratcheted up the pressure on a sector that's closely linked to international commerce. Additionally, as UPS scales back its low-margin business with Inc., the courier has set out to reduce costs by cutting jobs and closing facilities. Management said on its earnings call that workers have been leaving at a lower rate than expected, raising concerns among analysts about the company's future performance. UPS' quarterly results were a modest miss based on lowered expectations, 'but the bigger concern is the extreme lack of visibility' for the rest of the year, Morgan Stanley analyst Ravi Shanker wrote in a Tuesday note. ©2025 Bloomberg L.P. Sign in to access your portfolio
Bloomberg
14 hours ago
- Business
- Bloomberg
UPS's Lead Over FedEx in Market Value Shrinks to Narrowest Ever
United Parcel Service Inc. 's once-towering lead over rival FedEx Corp. in market valuation has shrunk to the smallest ever after a 29% plunge in UPS shares this year. The Atlanta-based company is struggling to manage high costs and improve volume amid uncertain trade policies. It did not provide revenue or operating profit guidance for 2025 when it reported second-quarter earnings Tuesday.
Yahoo
16 hours ago
- Business
- Yahoo
United Parcel (UPS) Drops 10.57% on Lower Income, Cautious Outlook
We recently published . United Parcel Service, Inc. (NYSE:UPS) is one of the worst-performing stocks on Tuesday. United Parcel Service extended its losing streak to a third consecutive day on Tuesday, shedding 10.57 percent to close at $90.84 apiece as investor sentiment was dampened by a dismal earnings performance and cautious business outlook. In its financial statement, United Parcel Service, Inc. (NYSE:UPS) said that net income dropped by 8.9 percent to $1.283 billion from $1.409 billion in the same period last year. Consolidated revenues dipped by 2.7 percent to $21.2 billion from $21.8 billion year-on-year. For full year 2025, United Parcel Service, Inc. (NYSE:UPS) posted a more cautious stance, failing to provide revenue and operating profit guidance amid macroeconomic uncertainties. Leonard Zhukovsky / However, United Parcel Service, Inc. (NYSE:UPS) hinted at a $1-billion share buyback program and paying as much as $5.5 billion in cash dividends to its shareholders. Distribution remains subject to the approval of its board of directors. 'Our second quarter results reflect both the complexity of the landscape and the strength of our execution. We are making meaningful progress on our strategic initiatives, and we're confident these actions are positioning the company for stronger long-term financial performance and enhanced competitive advantage,' said United Parcel Service, Inc. (NYSE:UPS) CEO Carol Tomé. While we acknowledge the potential of UPS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the . Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
