United Parcel Service driver pulls away after making a delivery in Washington, D.C.
Andrew Harrer | Bloomberg | Getty Images
United Parcel Service reported mixed third quarter results Tuesday morning, posting earnings that beat analyst expectations and revenue that fell short of predictions.
The company said softening demand globally hurt volumes, which was partially offset by higher pricing driven by inflation. Similar to rival FedEx, UPS plans to increase shipping rates by 6.9% effective Dec. 27 due to inflation and service costs.
For 2022, UPS stood by its outlook for revenue of $102 billion and adjusted operating margin of 13.7%, despite what CEO Carol Tomé called a “very dynamic” macroeconomic environment.
Here’s how the company performed compared to Wall Street expectations, according to Refinitiv.
- Earnings per share $2.99 vs. $2.84 expected.
- Revenue $24.16 billion vs. $24.30 billion expected.
Shares of the company closed down less than 1% Tuesday.
The company scaled back its expected capital expenditures for the year to $5 billion from about $5.5 billion. Chief Financial Officer Brian Newman said UPS was choosing to lease certain locations instead of buying them.
Revenue in U.S. and international packages grew from the same period last year, while the company’s supply chain solutions saw revenue shrink 6.3% due to declines in air and ocean freight forwarding.
Freight forwarding is the company’s large-volume pallet shipping operation that delivers large quantities of cargo across the world, managing customs and border logistics. The services sometimes use UPS vehicles and can consolidate shipments into other vehicles and routes.
The company said the declines were partially offset by growth in its logistics and health care businesses.
For the holidays, UPS expects volumes to be lower than last year, which the company attributed to changes in its contracts with larger clients. Last quarter, UPS said it was reducing its work with Amazon. Still, the company announced plans to hire at least 100,000 workers for the peak season.
Tomé said the company also expects holiday shipments to peak later in December than last year, as consumers return to more pre-pandemic spending habits.
Rival FedEx lowered its holiday volume forecast in October, weeks after it reported weakening demand, announced rate hikes and implemented broad cost-cutting measures. FedEx CEO Raj Subramaniam warned of a “worldwide recession.”