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United Parcel Service (UPS - Free Report) third-quarter 2023 earnings per share of $1.57 beat the Zacks Consensus Estimate of $1.53 but declined 47.5% year over year. Revenues of $21,061 million fell short of the Zacks Consensus Estimate of $21,538.7 million and decreased 12.8% year over year. Results were hurt by global weakness pertaining to delivery demand on the back of unfavorable macroeconomic conditions.
Management trimmed its revenue forecast for the full year due to weak e-commerce delivery demand and lost clients during the turbulent labor negotiations. The talks were ultimately fruitful as a labor deal was inked with International Brotherhood of Teamsters in August.
For 2023, UPS now anticipates revenues in the $91.3-$92.3 billion range (prior view: around $93 billion). The Zacks Consensus Estimate for current-year revenues is pegged at $92.66 billion.
The consolidated adjusted operating margin is now expected in the 10.8-11.3% band (prior view: 11.8%). Bleak projections and depressing revenue performance in the third quarter disappointed investors. As a result, the stock declined in early trading despite the earnings beat.
UPS generated $7,827 million of net cash from operating activities in the first nine months of 2023. Capital expenditures were $3,109 million. Free cash flow was $4,887 million.
Other Details of Q3
The overall adjusted operating profit fell 48.7% year over year to $1,615 million.
U.S. Domestic Package revenues decreased 11.1% year over year to $13,660 million, caused by an 11.5% dip in average daily volume. This was partially offset by a 2% increase in revenue per piece. Segmental operating profit (adjusted) plunged 60.6% year over year to $665 million. The adjusted operating margin for the segment was 4.9%.
Revenues at the International Package division summed $4,267 million, down 11.1% year over year. The downfall was due to a 6.6% reduction in average daily volume and weakness relating to trade in Asia and Europe. Segmental operating profit (adjusted) totaled $675 million, down 32.8% year over year. The adjusted operating margin for the segment was 15.8%.
Supply Chain Solutions revenues of $3,134 million fell 21.4% year over year due to market rate and volume declines in forwarding. Operating profit (on an adjusted basis) tumbled 40.1% to $275 million. The adjusted operating margin for the segment was 8.8%.
Other Aspects of 2023 Outlook
Capital expenditures are still forecast to be around $5.3 billion. UPS anticipates making dividend payments of $5.4 billion for the year. Management now envisions current-year share repurchases to be approximately $2.25 billion (previous guidance: $3 billion). Effective tax rate is projected to be roughly 22%.
Q3 Performance of Some Other Transportation Companies
United Airlines (UAL - Free Report) reported third-quarter 2023 earnings per share (excluding 23 cents from non-recurring items) of $3.65, which outpaced the Zacks Consensus Estimate of $3.40 and improved 29.9% year over year.
Operating revenues of $14,484 million beat the Zacks Consensus Estimate of $14,441.8 million. The top line increased 12.5% year over year due to upbeat air-travel demand.
J.B. Hunt Transport Services, Inc.’s (JBHT - Free Report) third-quarter 2023 earnings per share of $1.80 missed the Zacks Consensus Estimate of $1.85 and declined 30% year over year.
Total operating revenues of $3,163.8 million also lagged the Zacks Consensus Estimate of $3,224 million and fell 18% year over year.
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UPS Stock Declines Despite Q3 Earnings Beat: Here's Why
United Parcel Service (UPS - Free Report) third-quarter 2023 earnings per share of $1.57 beat the Zacks Consensus Estimate of $1.53 but declined 47.5% year over year. Revenues of $21,061 million fell short of the Zacks Consensus Estimate of $21,538.7 million and decreased 12.8% year over year. Results were hurt by global weakness pertaining to delivery demand on the back of unfavorable macroeconomic conditions.
Management trimmed its revenue forecast for the full year due to weak e-commerce delivery demand and lost clients during the turbulent labor negotiations. The talks were ultimately fruitful as a labor deal was inked with International Brotherhood of Teamsters in August.
For 2023, UPS now anticipates revenues in the $91.3-$92.3 billion range (prior view: around $93 billion). The Zacks Consensus Estimate for current-year revenues is pegged at $92.66 billion.
The consolidated adjusted operating margin is now expected in the 10.8-11.3% band (prior view: 11.8%). Bleak projections and depressing revenue performance in the third quarter disappointed investors. As a result, the stock declined in early trading despite the earnings beat.
UPS generated $7,827 million of net cash from operating activities in the first nine months of 2023. Capital expenditures were $3,109 million. Free cash flow was $4,887 million.
Other Details of Q3
The overall adjusted operating profit fell 48.7% year over year to $1,615 million.
U.S. Domestic Package revenues decreased 11.1% year over year to $13,660 million, caused by an 11.5% dip in average daily volume. This was partially offset by a 2% increase in revenue per piece. Segmental operating profit (adjusted) plunged 60.6% year over year to $665 million. The adjusted operating margin for the segment was 4.9%.
Revenues at the International Package division summed $4,267 million, down 11.1% year over year. The downfall was due to a 6.6% reduction in average daily volume and weakness relating to trade in Asia and Europe. Segmental operating profit (adjusted) totaled $675 million, down 32.8% year over year. The adjusted operating margin for the segment was 15.8%.
Supply Chain Solutions revenues of $3,134 million fell 21.4% year over year due to market rate and volume declines in forwarding. Operating profit (on an adjusted basis) tumbled 40.1% to $275 million. The adjusted operating margin for the segment was 8.8%.
Other Aspects of 2023 Outlook
Capital expenditures are still forecast to be around $5.3 billion. UPS anticipates making dividend payments of $5.4 billion for the year. Management now envisions current-year share repurchases to be approximately $2.25 billion (previous guidance: $3 billion). Effective tax rate is projected to be roughly 22%.
Zacks Rank
Currently, UPS carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Q3 Performance of Some Other Transportation Companies
United Airlines (UAL - Free Report) reported third-quarter 2023 earnings per share (excluding 23 cents from non-recurring items) of $3.65, which outpaced the Zacks Consensus Estimate of $3.40 and improved 29.9% year over year.
Operating revenues of $14,484 million beat the Zacks Consensus Estimate of $14,441.8 million. The top line increased 12.5% year over year due to upbeat air-travel demand.
J.B. Hunt Transport Services, Inc.’s (JBHT - Free Report) third-quarter 2023 earnings per share of $1.80 missed the Zacks Consensus Estimate of $1.85 and declined 30% year over year.
Total operating revenues of $3,163.8 million also lagged the Zacks Consensus Estimate of $3,224 million and fell 18% year over year.