Consultant’s Insight: UPS reports financial and volume declines

It was a disappointing start to 2024 for UPS , as the company reported a 5.3% year-over-year decline in the first-quarter, a consolidated revenue of $21.7 billion and a 36.5% YoY decline in consolidated profit of $1.6 billion. [caption id="attachment_69752" align="alignleft" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] “Our financial performance in the first quarter was in line with our expectations, and average daily volume in the U.S. showed improvement through the quarter,” UPS Chief Executive Carol Tome said in a statement about first-quarter earnings today. “Looking ahead, we expect to return to volume and revenue growth.” Indeed, in UPS’ outlook for 2024, Chief Financial Officer Brian Newman told analysts during its fourth-quarter earnings call in January , “Cost will weigh on us in the first half of the year, primarily due to the higher labor cost inflation associated with the new [ Teamsters ] contract. Looking at consolidated revenue, in the first half of the year, we expect the growth rate to decline with a range of approximately 1% to 2%, with the first quarter driving the decline.” However, Q1 declines were deeper than expected as UPS highlighted lower fuel and demand surcharges impacting revenue. All three divisions reported declines in revenue and double-digit declines in operating profits. Average daily volumes fell 5% in the U.S. domestic division, despite a 10% increase in SurePost volumes, and declined 6.3% in the international division. Meanwhile, UPS supply chain solutions attributed revenue and operating profit declines to market rate declines in forwarding. In previous calls, UPS has stressed in previous calls the need to protect revenue per parcel. During Q1, it was a mixed bag, with average revenue per parcel for UPS Ground declining 1.2% for domestic and 0.6% for international export parcels. The TD Cowen/AFS Freight Index forecasted for the second quarter that UPS and FedEx would increase surcharges to raise the revenue per parcel. Additional ZIP codes were added to delivery area surcharges in early April and UPS’ U.S. Ground Domestic, UPS SurePost fuel surcharge and the U.S. Domestic Air fuel surchargwill increase effective April 29. “After significant discounting to compete for falling package volumes last year, UPS and FedEx have deployed accessorial charges as more covert tools to increase yields, with changes to fuel, demand and delivery area surcharges targeted to boost revenue,” Louisiana-based forwarder AFS Logistics CEO Tom Nightingale said in a statement today. However, UPS’ international domestic parcels average revenue per parcel increased 5.5%. UPS’ most profitable trade lane, China to the U.S., helped drive the positive revenue per parcel growth, with volume up 12.8%. Meanwhile, U.S. domestic next-day air and deferred saw 4.4% and 7% increases, respectively. USPS Additional details on the P ostal Service (USPS) contract were provided during the analyst call. USPS announced on April 1 that UPS will become its primary domestic air carrier effective Sept. 30 for a five-and-a-half-year minimum base term. UPS’ Tome noted that the contract “fits beautifully with our B2B volumes.” But it will also be beneficial for this year’s peak season. Tome told analysts that UPS expects a “perky peak” this year. For the USPS contract, UPS will use its integrated network, allowing it to bypass UPS Worldport as needed to fly between regional air gateways. UPS does not plan to add planes because it has “plenty of space on its existing planes” and plans to hire fewer than 200 pilots to support the contract, Tome said. Outlook UPS expects some revenue and volume improvements in Q2, but stronger improvements will likely be seen in the second half of the year. It will continue to focus on improving operational efficiencies.

Consultant’s Insight: UPS reports financial and volume declines

Pattaya Airways takes Thailand’s only ATR freighter

Kuehne+Nagel air logistics net turnover drops 15% in Q1

Related Posts

From the Cockpit with K2 Aviation’s Karl Ryan

Production freighter activity highlights May FATs

Widebodies account for more than half of April’s transactions

Kuehne+Nagel air logistics net turnover drops 15% in Q1

Cargo Facts Free Newsletters

Cargo Facts Connect Podcast

Follow Us

Welcome Back!

Retrieve your password