UPS positively surprises in the third quarter of the year

 

United Parcel Service Results 

Good figures for the third quarter of 2024, thanks to the recovery of volumes, and improved guidance

Key figures versus consensus (Bloomberg): 

• Revenues : $22,245 million (+6% YoY) vs. $22,157 million expected.
• EBIT $1,983M (+23% YoY) vs. $1,887M expected.
• BNA  1,503M$ (+12% YoY) vs.
  1,401M$ expected.
• EPS $1.76 (+12%) vs. $1.63 expected.
  
  

Looking ahead to 2024, it raises Operating Margin guidance to 9.6% (vs. 9.4% prev. and 9.3% sp.) and lowers Revenue guidance to $91.1 billion (vs. $93.0 billion prev. and $91.897 billion sp.) to adjust for the sale of its Coyote truck brokerage segment to RXO.

Link to the results

UPS earnings review

UPS has delivered a positive surprise in Q3 2024 with top-line figures rebounding for the first time in almost two years . This is due to the recovery in volumes (+5%), especially in the US (+7%), and cost-cutting initiatives offset by the shift to cheaper (less profitable) transport services by clients such as Shein or Temu.

These good results and the improved guidance encouraged other companies in the sector such as FedEx (+2%) or DHL (+2%; Buy). We will have to keep an eye on the end of the year, which could be more favourable for UPS, to:

(i) The evolution of the Christmas and Black Friday campaigns. This is the season of greatest demand for UPS, but this year it may be affected by a shorter period between Thanksgiving and Christmas. This would mean fewer online sales and, therefore, fewer package shipments;

(ii) The impact of increased labour costs due to the new agreement, which is expected to be minor as 46% of the wage increases have been absorbed between 2H 2023 and 1H 2024;

(iii) The entry into force on September 29 of the new agreement reached with the US Postal Service (USPS) to be its main air transport provider;

(iv) The cost-cutting and efficiency improvement policies announced this year. These include the restructuring of delivery routes, the application of artificial intelligence and the reduction of 14% of the workforce, with which they estimate a saving of $1,000M in 2024 and

(v) The development of its “Better and Bolder” strategy, which aims to become the world’s leading supplier of small packages.

He has highlighted international expansion as one of his growth priorities for the company, as seen recently with the acquisition of Estafeta, a Mexican express transport company.