UPS exceeds profit estimates despite lower volumes

A UPS delivery van is driven along a city street in Garden Grove, California, U.S., March 29, 2022. REUTERS/Mike Blake

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July 26 (Reuters) – United Parcel Service Inc (UPS.N) reported better-than-expected quarterly profit on Tuesday as more expensive deliveries helped the largest U.S. parcel carrier offset lower volumes.

The return of foot traffic to malls and brick-and-mortar stores has led to the dissipation of a surge in e-commerce, leading to lower volumes for delivery businesses that faced increased online shopping in 2020.

Atlanta-based UPS saw consolidated volumes fall 4.8% to 23.1 million in the second quarter from a year earlier as more customers returned to stores.

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“Volumes are down as there is a shift from goods to services, so investors are worried that prices will go down,” said Cowen analyst Helane Becker.

Pandemic-weary consumers shifted some spending from goods to services in response to the lifting of COVID prevention measures by the United States. At the same time, record gasoline prices have reduced disposable income.

UPS shares fell 1% in premarket trading.

In April, UPS said it expected volumes to decline in the first half of the year before improving in the latter part of the year.

However, the delivery company continues to report rising profits, helped by its strategy that favors lucrative deliveries over volume.

Higher shipping rates and fuel surcharges also helped the company offset a drop in packages.

UPS posted second-quarter adjusted earnings of $3.29 per share, above analysts’ estimate of $3.16, according to Refinitiv data.

Revenue rose 5.7% to $24.76 billion, beating estimates of $24.63 billion.

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Reporting by Aishwarya Nair in Bengaluru; Editing by Maju Samuel

Our standards: The Thomson Reuters Trust Principles.

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