Why UPS Stock Plummeted After Disappointing Q4 Earnings Reveal Strategic Shift
UPS shares dropped sharply following weaker-than-anticipated Q4 financial results and a major reduction in business with Amazon, signaling a strategic pivot for the shipping giant.
Shares of United Parcel Service (UPS) fell dramatically by over 16% on Thursday, leading the decline among S&P 500 stocks after the company reported quarterly earnings that missed Wall Street expectations.
UPS posted a net income of $1.72 billion, or $2.01 per share, on revenues totaling $25.3 billion. Analysts had forecasted earnings of $2.14 billion, or $2.51 per share, on slightly higher revenue of $25.35 billion, according to Visible Alpha data.
However, when excluding $639 million in pension-related charges, UPS reported adjusted earnings per share of $2.75, surpassing analyst estimates of $2.51 per share.
UPS Announces Major Volume Reduction with Amazon
The company revealed it has agreed in principle with its largest customer to reduce shipment volumes by more than 50% by the latter half of 2026. Previous reports identified Amazon as UPS's biggest client, accounting for nearly 12% of total revenue in 2023.
During the earnings call, CEO Carol Tomé confirmed Amazon as the customer involved, emphasizing that while Amazon is UPS’s largest customer, it is not the most profitable. She noted that Amazon’s contribution to revenue is expected to decline to 11.8% in 2024.
Tomé explained that this reduction will allow UPS to prioritize higher-margin services, thereby enhancing profitability in the long run.
Looking ahead, UPS projects 2025 revenue to be approximately $89 billion, falling short of analyst estimates exceeding $95 billion. The company also announced the launch of multi-year 'efficiency reimagined' initiatives aimed at generating around $1 billion in cost savings.
This marks UPS's second consecutive quarter of year-over-year growth in revenue and profits, a rebound after several quarters of decline following the pandemic-driven surge in shipping demand.
UPS shares, which had already declined about 15% over the past year, closed at $111.56, their lowest price since 2020.
Note: This article has been updated to reflect the latest stock price and insights from UPS's earnings call.
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