UPS to cut 12,000 jobs, sees improving business conditions in second half of 2024

United Parcel Service (UPS), the world's largest parcel delivery company, is set to axe 12,000 jobs and review strategic options for Coyote, its truckload freight brokerage business. This comes after the firm projected full-year revenue lower than expected. UPS's shares saw a sharp drop of 6.3% in early trading following this news. Chief Executive Carol Tome described the previous year as "difficult and disappointing" as UPS witnessed a decline in volume, revenue and operating profit across all its business segments.

The company now aims to cut costs by $1 billion. UPS, which is considered an indicator of the global economy, does not anticipate better business conditions until the second half of 2024. It predicts its full-year revenue to be between $92 billion and $94.5 billion, falling short of analyst estimates of $95.57 billion, according to LSEG data.

The Atlanta-based corporation is grappling with increasing labour costs stemming from its new contract with the Teamsters union, along with a drop in average daily volume. It anticipates its lowest consolidated operating margin for the year in the first quarter, according to Chief Financial Officer Brian Newman. Despite this, UPS managed to recapture 60% of the business it lost to competitors like FedEx during its tumultuous labor negotiations last summer. However, customers are increasingly favoring less profitable ground-based delivery over air-based services, adding to the pressures facing both UPS and FedEx.

For the fourth quarter, UPS's revenue from its international air-based segment and its truck-based US business sank by 6.9% and 7.3% respectively. The firm's quarterly revenue fell from $27 billion a year before to $24.9 billion, missing out on analysts' estimates of $25.43 billion. Adjusted profits also dwindled to $2.47 per share from $3.62 per share in the previous year. However, these results were slightly above the analysts' predictions of $2.46 per share.