Shares of United Parcel Service plunged on Tuesday after the shipping giant’s disappointing earnings signaled its shipping business is still in decline.
On Tuesday, UPS reported second-quarter earnings per share of $1.79 on sales of $21.8 billion. Wall Street had expected earnings per share of $1.99 on sales of $22.2 billion, according to FactSet. In the year-ago quarter, UPS reported earnings per share of $2.54 on sales of $22.1 billion.
The stock fell 12% to $127.73.
S&P 500 Index
up about 0.2% and
Dow Jones Industrial Average
down about 0.1%.
The logistics company, seen as a bellwether for the economy, also updated its 2024 outlook, cutting its consolidated revenue guidance to $93 billion, down $250 million from the previous midpoint. Operating profit is expected to be about $8.7 billion; the midpoint of the previous guidance was about $9.6 billion. Wall Street is currently projecting about $9.6 billion in operating profit for 2024.
The numbers were weak. Lower shipment volumes, lower prices and higher labor costs weighed on profits. Adjusted profit fell year-over-year for the sixth straight quarter, according to FactSet. Sales have fallen for seven straight quarters.
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Volume growth returned to the U.S. domestic market, up 1% year-over-year. That’s a small positive, but higher volumes don’t translate into more profits. “The market will probably leave the second quarter feeling better because volumes haven’t been disrupted,” Bernstein analyst David Vernon wrote. “At the same time [time wonder] whether the focus on revenue quality is shifting from value to volume. We are gradually becoming pessimistic about the rate of margin improvement.”
He rates the stock Buy and has a $184 price target on UPS shares.
The stock has plunged despite relatively low expectations. Coming into Tuesday, UPS shares had fallen nearly 8% this year, lagging the S&P 500’s gain of about 24 percentage points.
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“Transportation investor sentiment is most negative toward packages … especially UPS,” Baird analyst Garrett Holland wrote in a preview report.
However, he had hoped UPS would meet its second-half estimates. That has not been the case. Holland rates UPS a Buy with a $170 price target.
The options market suggests UPS shares will move up or down about 5% after earnings. The stock has moved an average of about 4% over the past four reports. Shares have risen once and fallen three times during that span.
Write to Al Root at allen.root@dowjones.com and George Glover at george.glover@dowjones.com
