United Parcel Service (UPS -8.20%) failed to deliver for investors this earnings season, and the stock is trading off as a result. Shares of UPS opened down 8% on Tuesday on weak revenue and tepid guidance for 2024.
Weakness across the board
UPS came into earnings season under a lot of scrutiny. As 2023 progressed investors grew increasingly concerned about the strength of the economy, and with it shipping volumes. The company’s quarterly results and outlook did little to ease those concerns.
UPS earned $2.47 per share in the fourth quarter, a penny ahead of estimates, but revenue of $24.9 billion was nearly $500 million short of expectations. The company also forecast sales of $92 billion to $94.5 billion in 2024, shy of the $95.57 billion consensus.
“2023 was a unique and difficult year,” CEO Carol Tomé said in a statement, noting that UPS experienced declines in volume, revenue, and operating profits in all segments of its business.
UPS officials said on the post-earnings call they are considering divesting its Coyote truck brokerage business, which Tomé said was “highly cyclical” with a lot of earnings volatility.
Is UPS stock a buy after earnings?
The news wasn’t all bad. UPS boosted its dividend by a penny to $1.63 per share, the 15th consecutive year with a dividend increase. Tomé said pricing in the U.S. is “very rational,” though Europe is struggling in part due to the chaos caused by geopolitical tensions in the Middle East.
UPS also provided a reminder of its importance to the modern retail landscape, noting that more than 10% of its volume was related to Amazon in 2023. That’s both an asset and a risk, as Amazon is expanding its logistics operations. However, even if UPS’ Amazon share were to decline the overall growth in e-commerce should continue.
Shares of UPS are now down 20% over the past year, though they are still well above their pre-pandemic range. This is shaping up to be a transition year for UPS, and the stock could remain under pressure in the near term as a result, but for long-term focused investors this is an intriguing time to consider this transportation giant.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Lou Whiteman has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.
