UPS Shares Slide After Missing Q2 Revenue Estimates, Lowers FY23 Guidance

United Parcel Service Inc UPS reported a second-quarter FY23 revenue decline of 10.9% year-over-year to $22.055 billion, missing the consensus of $23.11 billion. 

Adjusted EPS was $2.54, compared to $3.29, beating the consensus of $2.50.

Consolidated operating profit was $2.8 billion, down 21.4% Y/Y and down 18.4% on an adjusted basis.

U.S. Domestic Segment revenue fell 6.9% Y/Y to $14.39 billion, driven by a 9.9% decrease in average daily volume. The adjusted operating margin stood at 11.7%.

International Segment revenue decreased by 13% Y/Y to $4.42 billion, owing to a 6.6% Y/Y decline in average daily volume and continued softness on Asia trade lanes. The adjusted operating margin was 20.4%.

Supply Chain Solutions Segment revenue decreased by 23.4% to $3.24 billion due to market rate and volume declines in forwarding business, and the adjusted operating margin was 10.4%.

UPS’ operating cash flow for six months ended June 30, 2023, totaled $5.59 billion, and Free cash flow was $3.84 billion.

Adjusted total debt/adjusted EBITDA was 1.62 for the quarter.

UPS updated its FY23 consolidated revenue and adjusted operating margin targets to reflect the volume impact from labor negotiations and the costs associated with the tentative agreement reached with the International Brotherhood of Teamsters on July 25, 2023. 

FY23 Outlook: UPS now expects consolidated revenue to be about $93 billion (prior $97 billion) Vs. consensus of $96.77 billion and an adjusted operating margin of around 11.8% (prior 12.8%).

The company reaffirmed its capital allocation plans and expects capital expenditures to be about $5.3 billion, dividend payments to be around $5.4 billion, subject to board approval, and share repurchases to be around $3 billion.

Price Action: UPS shares are trading lower by 1.63% at $179.18 on the last check Tuesday.