UPS trims full-year guidance: ‘this is a beneficial outlook for FedEx’

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on Aug 8, 2023
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  • UPS reports weaker-than-expected revenue for its fiscal Q2.
  • Evercore ISI analyst discussed its earnings print today on CNBC.
  • UPS stock is now roughly flat versus the start of this year.

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United Parcel Service Inc (NYSE: UPS) opened in the red today after reporting weaker-than-expected revenue for its fiscal second quarter.

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UPS stock down on lowered guidance

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Investors are disappointed because the management lowered its guidance for the full year as well.

UPS now forecasts about $93 billion in revenue this year and expects operating margin to sit around 11.8%. On CNBC’s “Squawk Box”, Evercore ISI analyst Jonathan Chappell said this morning:

UPS will have to raise prices to offset labour inflation. FedEx can then move their prices up and have their costs moving in the opposite direction. This is a beneficial outlook for FedEx.

UPS continues to expect $5.3 billion in capital expenditures this year. It also reiterated its guidance for $5.4 billion in dividend payments and $3.0 billion worth of share repurchase in 2023.

UPS Q2 financial highlights

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  • Earned $2.08 billion versus the year-ago $2.85 billion
  • Per-share earnings also declined from $3.25 to $2.42
  • Adjusted EPS printed at $2.54 as per the press release
  • Revenue tanked 10.9% year-on-year to $22.06 billion
  • Consensus was $2.49 a share on $23.04 billion revenue
  • Adjusted operating margin came in at 13.2% in fiscal Q2

What else was noteworthy?

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Other notable figures in earnings report include a wider-than-expected 6.9% revenue decline in the U.S. domestic segment.

International and supply chains solutions tanked 13% and 23.4%, respectively – also shy of Street estimates. According to the Evercore ISI analyst:

I think that was more specific to UPS and what they had to deal with the Teamsters negotiations up until two weeks ago.

Note that UPS has now reached a “win-win-win” agreement with the aforementioned labour union that represents over 300,000 of its employees. Its shares are now trading roughly at the same price at which they started 2023.

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