UPS (UPS) shares plunged Tuesday after the company reported a decline in both earnings and revenue for the second quarter of 2024, falling short of Wall Street expectations.
The company's adjusted earnings per share (EPS) came in at $1.79, below the analyst estimate of $2.00, marking a significant 29.5% drop from the $2.54 reported in the same quarter last year. Revenue also saw a slight decrease of 1.1% to $21.8 billion, missing the consensus estimate of $22.17 billion.
Following the announcement, UPS shares tumbled by over 12%, indicating a negative market response to the earnings and revenue shortfall.
CEO Carol Tomé acknowledged the challenges faced in the quarter, stating, "This quarter was a significant turning point for our company as we returned to volume growth in the U.S., the first time in nine quarters. As expected, our operating profit declined in the first half of 2024 from what we reported last year. Going forward we expect to return to operating profit growth."
In the U.S. Domestic Segment, revenue decreased by 1.9%, impacted by a 2.6% decrease in revenue per piece due to changes in product mix. The International Segment experienced a revenue decrease of 1.0%, primarily driven by a 2.9% decrease in average daily volume.
However, the Supply Chain Solutions segment saw a revenue increase of 2.6%, attributed mainly to growth in logistics, including healthcare.
Looking ahead, UPS has updated its full-year 2024 financial guidance, forecasting consolidated revenue to be approximately $93.0 billion, which is slightly above the analyst consensus of $92.8 billion.
The company also expects a consolidated adjusted operating margin of about 9.4% and is targeting around $500 million in share repurchases.
Despite the market's negative reaction to the current quarter's performance, UPS remains optimistic about its future prospects.
The company's full-year revenue guidance is marginally higher than analyst expectations, suggesting confidence in its ability to navigate through the headwinds encountered in the first half of the year.
Reacting to the results, analysts at Morgan Stanley told investors in a note that while the risk to 2Q earnings and challenges facing 2H guidance were reasonably well known, "the magnitude of the cut, together with the
continuation of the series of guidance cuts that began last August, likely further reset positioning."
Analysts at Jefferies told investors in a note that following more than a year of missteps, guide cuts, and lost investor confidence, including questions surrounding the achievability of its Analyst Day long-term targets, they "think this quarter represents a further leg down on investor sentiment for the stock."
Analysts at BMO Capital stated: "Q2/24 EBIT came in ~11% below expectations, largely driven by weaker-than-anticipated results in the Domestic segment, where revenue/piece was softer than expected."
"Weaker-than-expected US Domestic segment. US Domestic volumes were roughly in line with expectations, with seasonal performance slightly worse than typical and with unfavorable mix driving revenue/piece down 2.6% y/y, while cost/piece was up 2.5% y/y. Ground revenue/piece was also down sequentially and down 3.3% y/y, which perhaps underscores increasing competitive intensity."