Challenges Ahead
Shares of UPS, listed as NYSE:UPS, are experiencing a significant drop of 7.6% in response to the company’s disappointing 2024 guidance and its decision to slash 12,000 jobs due to escalated union labor expenses and sluggish demand.
Strategic Cutbacks
The job reductions will primarily impact full- and part-time managerial roles as well as contract workers, delivering approximately $1 billion in cost savings to UPS.
Strategic Shifts
Additionally, UPS is actively exploring new possibilities for its Coyote trucking brokerage business, following a non-cash, after-tax impairment charge of $84 million in the previous quarter, prompting concerns from Morgan Stanley about other brokerage companies.
Company’s Response
CEO Carol Tome acknowledged the challenges of 2023, a year marked by challenging labor negotiations and substantial wage increases. Combined with unpropitious macroeconomic conditions, UPS anticipates its adjusted operating margin to hover between 10% and 10.6%, down from 10.9% in 2023.
Revenue Forecast
UPS reported a 9.3% contraction in total revenue for the year and anticipates a modest 1.1% upturn in 2024. Analysts cautioned that the company’s guidance seemed overly ambitious throughout 2023 and infers intense pressures on earnings per share for the rest of the year, as inflation rates ease. Wolfe Research maintains a Peer Perform rating for UPS.
