UPS Q4 Earnings: Major Customer Volume Cut Raises Jitters, Stock Tanks

United Parcel Service Inc UPS shares are trading lower after the company reported mixed fourth-quarter results.

UPS reported consolidated revenue growth of 1.5% year-over-year to $25.301 billion, missing the consensus of $25.419 billion. Adjusted EPS was $2.75, up 11.3% YoY, above the consensus of $2.53.

GAAP results include a $639 million charge ($0.74 per share), covering a $506 million pension charge, $73 million in transformation costs, $46 million in asset impairments, and $14 million for pension withdrawal.

Consolidated operating profit reached $2.9 billion, increasing 18.1% from the last year quarter and 11.2% on a non-GAAP adjusted basis. Adjusted operating margin stood at 12.3%, up from 11.2% a year ago.

U.S. Domestic Segment revenue increased 2.2% to $17.312 billion, reflecting a 2.4% increase in revenue per piece and increases in air cargo. The adjusted operating margin stood at 10.1%.

International Segment revenue grew 6.9% to $4.923 billion, reflecting an 8.8% increase in average daily volume. The adjusted operating margin was 21.6%.

Supply Chain Solutions Segment revenue declined by 9.1% to $3.066 billion, driven by the Coyote divestiture, partially offset by growth in air and ocean forwarding. The adjusted operating margin was 9.3%.

UPS’ operating cash flow for fiscal 2024 totaled $10.1 billion, and free cash flow was $6.3 billion. The company returned $5.9 billion to shareholders through dividends and share buybacks.

“We are making business and operational changes that, along with the foundational changes we’ve already made, will put us further down the path to becoming a more profitable, agile and differentiated UPS that is growing in the best parts of the market,” commented Carol Tomé, UPS chief executive officer.

Strategic Actions: The company announced reaching an agreement to reduce volume with its largest customer by over 50% by late 2026, insourcing 100% of UPS SurePost from January 1, 2025, and reconfiguring its U.S. network. Additionally, UPS is launching multi-year “Efficiency Reimagined” initiatives, aiming to save $1 billion through an end-to-end process redesign.

2025 Outlook: UPS expects revenue of ~ $89 billion, sharply below the $94.877 billion consensus, and sees an adjusted operating margin of 10.8%.

The company plans $3.5 billion in capital spending, $5.5 billion in dividends (pending approval), $1 billion in share buybacks, and an expected 23.5% tax rate.

Price Action: UPS shares are trading lower by 13.5% at $115.66 premarket at the last check Thursday.

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