UPS Earnings Rise 3.3% Amid Cost Cuts, Network Revamp
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UPS Inc. experienced a during the first quarter amid ongoing efforts to reduce costs and improve its network, the company reported April 29.
The Atlanta-based shipping and logistics company posted an operating profit of $1.67 billion, or $1.40 a diluted share, for the three months ending March 31. That compared with $1.61 billion, or $1.30, during the same time the previous year. Total consolidated revenue decreased 0.7% to $21.5 billion from $21.7 billion.
The results came in close to expectations by investment analysts on Wall Street. Projections called for $1.42 per share and quarterly revenue of $21.06 billion, according to Zacks Consensus Estimate.
“While our revenue and volume in the first quarter were in line with our expectations, results by month were not,” CEO Carol Tomé said during a call with investors. “As we moved into February and March, uncertainty surrounding global trade policies and other matters led to a drop in consumer confidence and muted demand from some enterprise and [small- and midsize business] customers.”
Tomé added that demand for U.S. inbound services surged as customers pulled inventory purchases forward ahead of expected tariff changes. UPS leveraged its global portfolio and brokerage technology to help customers avoid border disruptions. This resulted in U.S. outbound volume increasing 9.5% in the first quarter.
“In January, we announced three strategic actions to drive our business to a more profitable, agile and differentiated UPS,” Tomé said, mentioning the plan to decrease Amazon’s volume.
“We reached agreement with Amazon to reduce their volume in our network by more than 50% by June of 2026. Note that the volume we are transitioning out is Amazon’s fulfillment center outbound volume.”
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The UPS plan involves optimizing its network with expected volume levels and increased productivity through additional automation. The Amazon volume being phased out was determined to neither be profitable nor a good fit for the network. UPS is still keeping some volume from the online retail giant.
“With this reconfiguration, we will also lessen our dependency on labor, reduce the capital requirements needed to run the network, and will drive structural operating margins and return on invested capital improvement,” Tomé said. “Well, this may be the largest network reconfiguration in our history, we’ve got experience that gives us confidence that we will be able to complete our plan with very little customer disruption and at the right cost to serve.”
UPS also noted in the earnings release that it expects to reduce its operational workforce by about 20,000 positions this year as part of these efficiency initiatives. That also includes the expected closure of 73 leased and owned buildings by the end of June.
“Over the last couple of years, we’ve demonstrated our ability to manage hours and labor in line with changes in volume, all while staying within the confines of our labor agreement,” Tomé said. “In 2024, we successfully closed 11 buildings, and the learnings from those closings became the blueprint for our network reconfiguration approach. We are moving very quickly. In this first phase, we will complete 164 operational closures, including 73 building closures by the end of June.”
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Edward Jones believes the strategy will lead to increased profitability as UPS focuses on ensuring returns on the large sums of capital it has invested in its delivery network through pricing, efficiency and cost actions. The investment banking company also expects international growth and the continued rise in e-commerce to further drive demand.
“We believe that UPS had a good quarter, as the business leveraged cost controls and higher pricing to deliver earnings above estimates,” said Edward Jones analyst Jeff Windau. “We believe the company will be focused on restructuring the business to align costs and resources with shipping volumes.”
Revenue by segment
• U.S. Domestic increased 1.4% to $14.5 billion from $14.3 billion during the same time last year. This was driven by increases in air cargo and an improvement in revenue per piece that was able to partially offset a decline in volumes. Operating profit increased 17.5% to $979 million from $833 million last year.
• International increased 2.7% to $4.37 billion from $4.26 billion. The earnings report noted that this was driven by a rise in average daily volumes. Operating profit decreased 2.3% to $641 million from $656 million the prior year.
• Supply Chain Solutions declined 14.8% to $2.71 billion from $3.18 billion during the year-ago period. The report credits this primarily due to the divestiture of Coyote Logistics. Operating profit fell 62.9% to $46 million from $124 million.
UPS ranks No. 1 on the Transport Topics Top 100 list of the largest for-hire carriers in North America, and UPS Supply Chain Solutions is No. 5 on the TT Top 100 list of the largest logistics companies. The company also ranks No. 3 on the TT Top 50 list of the largest global freight carriers.
