UPS Sees Profit Growth for First Time in Nearly Two Years
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UPS Inc. posted a year-over-year increase in revenue during the third quarter of 2024 despite challenging market conditions, the company reported Oct. 24.
The Atlanta-based shipping and logistics company reported net income of $1.54 billion, or $1.80 a diluted share, for the three months ending Sept. 30. That compared with $1.13 billion, $1.31, during the same time a year ago. Total consolidated revenue increased by 5.6% to $22.2 billion compared with $21.1 billion.
“In the third quarter, we faced a macro environment that was slightly worse than we expected,” UPS CEO Carol Tomé said during a conference call with investors. “In the U.S., online sales slowed, and manufacturing activity was lower than we anticipated. This slowdown in manufacturing activity was also true outside of the U.S., as we continue to see lower industrial production weigh on volume in certain geographies.”
Wall Street investment analysts had been looking for EPS of $1.65 per share and quarterly revenue of $22.3 billion, according to Zacks Consensus Estimate.
Tomé
Tomé said UPS managed to post gains through these difficult conditions by leaning into more favorable parts of the market and by controlling expenses through ongoing productivity initiatives. UPS also focused on certain top commercial businesses and by growing B2B volume by nearly 1% year over year.
“In the U.S., this was the second consecutive quarter of average daily volume growth,” Tomé said. “In international, average daily volume growth finished flattish and continued the upward momentum we’ve seen since the first quarter of this year.” She noted that as volume has begun flowing back into the U.S. network, UPS has been refocusing on revenue quality by reassessing operations such as commerce packages. It also has been strategically adjusting pricing and optimizing operations in specific portions of its business.
“We have a goal to become the No. 1 complex health care logistics provider in the world,” Tomé said. “To that end, we said we would pursue certain inorganic opportunities, and we have. Last month, we entered into an agreement to acquire Frigo-Trans, a move that will enhance our end-to-end temperature-sensitive health care capabilities across Europe.”
Based in Germany, Frigo-Trans provides temperature-controlled and time-sensitive freight forwarding and temperature-controlled warehouse capabilities throughout Europe. Tomé noted that 80% of pharmaceuticals in Europe require temperature-controlled transportation. UPS plans to close the deal during the first quarter of next year.
UPS also is working on bolstering its domestic operations.
“We have been onboarding our new air cargo business with the United States Postal Service,” Tomé said. “During the third quarter, our network planning teams worked closely with the USPS to ensure the transition progressed smoothly, and it did. As of Oct. 1, all contracted USPS air cargo business has been fully onboarded, and we expect this business to deliver strong, consistent revenue and an attractive margin.”
UPS in Q3 also completed its disposition of Coyote Logistics. Its results for the quarter include an after-tax net benefit of $36 million from the divestiture, net of transformation strategy costs of $116 million.
The company said its U.S. Domestic segment revenue increased 5.8% to $14.5 billion from $13.7 billion from a year ago, while operating profit increased 57.3% to $898 million from $571 million last year. UPS attributed the revenue growth to a 6.5% increase in average daily volume.
International segment revenue increased 3.4% to $4.41 billion from $4.27 billion during the prior-year period, as operating profit increased 26.7% to $798 million from $630 million. The report noted revenue gains were driven primarily by a 2.5% increase in revenue per piece.
Supply Chain Solutions segment revenue increased 8% to $3.38 billion from $3.13 billion last year, as operating profit jumped 104% to $289 million from $142 million. The revenue growth was due primarily to growth in air and ocean forwarding and the continued onboarding of USPS air cargo, UPS said.
UPS ranks No. 1 and FedEx No. 2 on the Transport Topics Top 100 list of the largest for-hire carriers in North America, and UPS Supply Chain Solutions is No. 4 on the TT Top 100 logistics companies list.
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