United Parcel Service (UPS) reported a significant drop in shipping volume, both domestically and internationally, in its fourth-quarter earnings report released on Tuesday. The company also revealed plans to implement a workforce reduction of 12,000 employees in 2024 as part of a strategic resource alignment effort. The job cuts are expected to result in cost savings of approximately $1 billion, according to CEO Carol Tomé, who shared this information during a company earnings call.
Tomé acknowledged the challenges faced by UPS in 2023, describing it as a “unique, difficult, and disappointing year” marked by declines in volume, revenue, and operating profits across all three of the company’s business segments. As a consequence of these announcements, UPS shares experienced a notable decrease of over 8%. The financial performance of UPS in the fourth quarter of 2023 fell short of Wall Street expectations in several key areas:
For the last quarter of 2023, UPS reported a net income of $1.61 billion, equivalent to $1.87 per share, in contrast to $3.45 billion, or $3.96 per share, in the previous year. When adjusted for one-time items related to pensions and intangible assets, UPS earned $2.47 per share. Revenue also saw a significant decline of 7.8%, dropping from $27 billion the previous year to $24.9 billion.
UPS cited a 7.4% reduction in average daily volume domestically and an 8.3% decrease internationally. Tomé noted that the decline in international shipping was particularly pronounced in Europe, further exacerbated by freight complications in the Red Sea region, Panama, and Suez canals. While the earnings report did not explicitly mention the financial repercussions of labor contract negotiations with the Teamsters in August, Tomé suggested that these talks, along with broader macroeconomic conditions, contributed to the “disappointing” year.
In addition to the job cuts, UPS also revealed plans to consider selling its Coyote truck brokerage business, which Tomé described as a “highly cyclical” venture with “considerable earnings volatility.” Furthermore, the company intends to request employees to return to the office five days a week in 2024. UPS’ outlook for 2024 anticipates revenue in the range of $92 billion to $94.5 billion, with an adjusted operating margin expected to fall between 10% and 10.6%.