Shares of UPS (UPS) fell in pre-market trading after the shipping and logistics company reported disappointing results for its second quarter of FY24. The company’s adjusted diluted earnings per share came in at $1.79, a decline of 29.5% year-over-year, which missed analysts’ consensus estimate of $2 per share.
UPS’s Revenue Breakdown
The company’s revenues declined by 1.1% year-over-year, with revenue hitting $21.8 billion. This missed analysts’ expectations of $22.2 billion. More importantly, the Atlanta-based company “returned to volume growth in the U.S., the first time in nine quarters.”
For logistics providers like UPS and FedEx (FDX), demand for home deliveries has been lackluster since the end of the pandemic. This has led these companies to slash costs since late 2021. However, UPS now expects revenue and volume to improve in the second half of the year.
In the company’s domestic segment, revenues declined by 1.9% year-over-year to $14.2 billion in the second quarter. This drop in revenues was driven by a 2.6% decrease in revenue per piece. The U.S. domestic segment comprises more than 60% of the company’s revenues.
UPS’s FY24 Outlook
Looking forward, management now expects revenue to be around $93 billion, with an adjusted operating margin likely to be 9.4%. For reference, analysts had projected FY24 revenues to be $92.83 billion.
The company has restarted its share repurchase program and is targeting stock buybacks worth $1 billion annually. However, this year, UPS plans to buy back $500 million worth of stock. UPS had halted its stock buybacks late last year.
Is UPS a Good Stock to Buy Now?
Analysts remain cautiously optimistic about UPS stock, with a Moderate Buy consensus rating based on nine Buys, eight Holds, and one Sell. Over the past year, UPS has declined by more than 15%, and the average UPS price target of $159.17 implies an upside potential of 9.6% from current levels. These analyst ratings are likely to change following UPS’s Q2 results today.
