UPS Posts Q1 Profit Beat, Revenue Miss Stock up 2.33%

United Parcel Service ( UPS ) recently published its first-quarter results, indicating that while the shipping company surpassed adjusted profit estimates, it fell short of revenue expectations. The company affirmed its full-year guidance, with a projected revenue range of $92.0 billion to $94.5 billion and an adjusted operating margin of 10.0% to 10.6%.

UPS , along with other shipping companies such as FedEx, have had to make adjustments due to the fall in shipping demand and revenue. This decline comes after record highs during the pandemic. In the first quarter, UPS reported adjusted earnings per share (EPS) of $1.43 on adjusted net income of $1.22 billion. This exceeded analyst expectations of $1.31 per share and $1.12 billion.

UPS 's revenue of $21.7 billion came in slightly below the analyst's estimates of $21.89 billion. Nevertheless, UPS has reported a higher profit than estimated after reducing costs, with total operating expenses down 1.4% in the first quarter compared to last year.

As demand for package deliveries has decreased, shipping rival FedEx has also seen a decrease in revenue. UPS has affirmed its full-year guidance and expects to return to volume and revenue growth.

In the weeks leading up to the earnings report, UPS announced that it would replace FedEx as the primary air cargo provider of the U.S. Postal Service. The change is set to happen once the current contract with FedEx expires in September, but UPS has not disclosed how the contract's impact will affect its finances.

UPS shares initially jumped as much as 3% in premarket trading on Tuesday after the report was released. However, they reversed course and were trading about 1% lower an hour before the opening bell. UPS closed at $145.36 on Monday, up 1.8%, but the stock is still down more than 7% so far this year and 25% lower in the last 12 months.

The decline in average daily volumes in its domestic segment and a 5.8% drop in its international segment is an indication of the subdued demand for small-package delivery. Besides, the company's profit margins have come under pressure due to higher costs associated with a new labor contract with the Teamsters union. The company reported an adjusted operating margin of 8%, the lowest in 2024. UPS is absorbing 46% of the wage and benefit costs of the new five-year contract in 2024 and does not expect business conditions to improve until the second half of the year.

In summary, UPS 's Q1 profit beat adjusted estimates, while revenue fell short of expectations. The company is making adjustments in response to the fall in shipping demand and revenue. The change in the air cargo provider of the US Postal Service could have an impact on its finances in the future.