Stocks of UPS Drop Near a 3-Year Low After Another Revenue Miss

United Parcel Service Inc. (UPS) witnessed a substantial decline in its stock price on Thursday, as it extended a streak of quarterly revenue disappointments and revised its full-year guidance due to concerns about economic growth.

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UPS CEO Carol Tomé commented on the situation, noting that adverse macroeconomic conditions had a negative impact on global demand during the quarter. She also highlighted that the U.S. labor contract had been fully ratified in early September, and the volume that had shifted during the labor negotiations was now returning to the company's network. Tomé expressed confidence in the company's readiness for the upcoming peak holiday season.

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In premarket trading, UPS stock (Ticker: UPS) plummeted by 3.5%, potentially opening at its lowest price in regular-session hours since August 4, 2020.

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The company reported a net income of $1.13 billion, equivalent to $1.31 per share, in contrast to $2.58 billion, or $2.96 per share, in the same period the previous year. Excluding one-time items, the adjusted earnings per share came in at $1.57, surpassing the FactSet consensus of $1.52.

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Revenue experienced a significant decline of 12.8% to reach $21.1 billion, falling short of the FactSet consensus of $21.40 billion. This marked the fifth consecutive quarter of revenue misses for UPS.

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Domestic package revenue dwindled by 11.1% to $13.66 billion, falling short of expectations set at $13.74 billion. The average daily volume decreased by 11.5%, although revenue per piece increased by 2.0%.

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In the international package segment, revenue declined by 11.1%, totaling $4.27 billion, slightly below the FactSet consensus of $4.29 billion. Additionally, supply-chain and freight revenue experienced a significant drop of 21.4%, amounting to $3.13 billion, below the anticipated figure of $3.37 billion.

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For the year 2023, UPS revised its revenue outlook, now forecasting a range between $91.3 billion and $92.3 billion, down from the previous estimate of approximately $93 billion. The adjustment was primarily attributed to the uncertainty surrounding global macroeconomic conditions. The current FactSet consensus stands at $92.87 billion.

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UPS confirmed its full-year expectations for dividend payments, which are anticipated to be around $5.4 billion. However, the company reduced its projection for share repurchases from "around" $3 billion to "approximately" $2.25 billion.

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In the past three months leading up to Wednesday, UPS stock had seen a decline of 20.3%. In comparison, shares of rival company FedEx Corp. (Ticker: FDX) fell by 12.3%, and the broader S&P 500 index (Ticker: SPX) experienced an 8.3% decrease. This downward trend highlights the challenges faced by UPS in a dynamic economic environment.

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