UPS experienced a big drop in its stock price this week, following the announcement that the company will be cutting as many as 12,000 jobs, as well as a not-so-rosy revenue outlook.
During a conference call earlier this week, Carol Tome, the CEO of the company, said reducing the headcount will save UPS $1 billion. This comes only a few months after UPS settled a contract agreement with the Teamsters union back in September.
Before the agreement was put in place, it was a contentious negotiation, with the union threatening a strike that would have disrupted package deliveries throughout the county.
As part of the new contracts, both part-time and full-time workers who are members of the union will receive a pay raise. Another 7,500 full-time jobs were to be created, while another 22,500 open spots were going to be filled, which was done to allow workers who were part-time to transition into a full-time role.
Now, the future of the company is at least a little bit in question.
As part of the conference call this week, Tome hinted that the company might sell off the truck load brokerage business it owns, called Coyote. UPS acquired that company, which is based in Chicago, back in 2015 for $1.8 billion.
In addition to those announcements, UPS also said that the board approved increasing the quarterly dividend that it sends to shareholders by 1 cent on February 20.
All employees of UPS will be forced to return to in-person office work five days per week at some point in 2024 as well.
As Tome explained:
“We are going to fit our organization to our strategy and align our resources against what’s widely important.”
As for financials, UPS said it anticipates that its revenue for the year will fall somewhere between $92 billion and $94.5 billion. That range is below what many on Wall Street were expecting, which was revenue to come in at more than $95.5 billion.
Because of those projections, the company’s stock price dropped almost 8% earlier the week.
What’s more, UPS revenue underperformed expectations in the fourth quarter of 2023 as well. It dropped 7.8%, reaching $24.92 billion.
FactSet had conducted a poll of Wall Street analysts last year, which showed that Wall Street had projected that UPS revenue would reach $25.31 billion in the fourth quarter of last year.
In addition to revenue being lower, profits were as well for UPS.
In December of last year, UPS was decimated from a profit standpoint. It reached $1.61 billion total, or $1.87 per share, which was down from $3.45 billion, or $3.96 per share, from the same time the year before.
Quarterly per-share earnings sat at $2.47 on an adjusted basis, FactSet reported, which was one cent about what the average estimate was for the company.
Times certainly do look rough for UPS, and it could be getting even worse.
