Shares of United Parcel Service Inc. (UPS) were hit hard on Thursday morning, plunging 15% as investors reacted to a combination of mixed fourth-quarter results and disheartening guidance for 2025. The company reported consolidated revenues of $25.3 billion for the fourth quarter of 2024, marking only a modest 1.5% increase from the $24.9 billion earned during the same period last year. This revenue figure fell short of analysts' expectations, which had predicted approximately $25.4 billion.
According to the company’s earnings release, UPS's diluted earnings per share (EPS) came in at $2.01, with non-GAAP adjusted EPS rising to $2.75—up 11.3% year-over-year, beating the consensus of $2.53. Despite the beat on adjusted EPS, the results were overshadowed by the inclusion of significant charges. UPS reported total charges of $639 million, translating to approximately $0.74 per share. These expenses encompassed $506 million related to pension adjustments, $73 million tied to transformation strategy costs, $46 million for asset impairments, and $14 million associated with withdrawing from a multiemployer pension plan.
CEO Carol Tomé expressed gratitude toward UPS employees for their hard work, stating, “We closed out 2024 with an outstanding peak, delivering best-in-class service and strong financial results.” The company’s operating profit for the quarter reached $2.9 billion, reflecting an 18.1% increase year-over-year, presenting UPS as continuing to capitalize on holiday season delivery demand.
Examining the segments, the U.S. Domestic Segment saw revenues grow by 2.2% to $17.3 billion, spurred by air cargo increases and a 2.4% uptick in revenue per piece. The international segment performed well, with revenues climbing 6.9% to $4.9 billion, driven by increased shipping volumes. Conversely, the Supply Chain Solutions segment faced hardships, reporting a revenue decline of 9.1% due to the recent divestiture of Coyote Logistics.
For full-year 2024, UPS generated revenues totaling $91.1 billion, and operating profits amounted to $8.5 billion. Operating margin was reported at 9.3%, with projected margins for 2025 expected to hover at 10.8%. UPS plans to execute approximately $3.5 billion on capital expenditures and return around $5.5 billion to shareholders through dividends and buybacks.
Looking forward, UPS’s strategic decisions have raised eyebrows and spurred concern among investors. The company announced intentions to reduce its volume with Amazon, believed to represent 11.8% of its revenue, by over 50% by the second half of 2026, clearly marking Amazon as its largest but not most profitable customer. Tomé noted, "We are making business and operational changes…that will put us down the path to becoming more profitable, agile, and differentiated.”
UPS’s forecast for 2025 estimated revenues to be approximately $89 billion—significantly below analyst expectations of around $94.9 billion. This disappointment emerged from what seemed to be softened demand for parcel shipping, as pandemic-era peaks fell back, leading clients to downgrade from premium to economy services. Concurrently, UPS is retrenching its business, aiming to cut costs through operational enhancements such as closing facilities across the U.S. and embarking on its “Efficiency Reimagined” initiative aimed at saving $1 billion through restructured operational processes.
Investors have reacted strongly to UPS's revenue forecast and restructuring news. Following the earnings release, UPS shares fell to $113.45, marking the steepest decline since 2008. The company's shares had already endured significant declines over the past year, and the 2025 outlook only deepened investor hesitancy amid prolonged revenue misses, raising questions about UPS's ability to rebound.
On the analysts' front, views seem to vary. Daniel Imbro from Stephens Inc. commented, “It does fit with their strategy of ‘better, not bigger,’” yet expressed concern over the revenue stagnation. Commentators have pointed to the challenges UPS faces as it attempts to balance revenue growth amid changing customer dynamics, post-pandemic realities, and pressure from labor-related costs.
UPS continues to target higher-margin segments including healthcare, eyeing $20 billion from this area by 2026 to help counterbalance the current softness and seek sustainable growth. Despite operational changes and hopes of increased profitability, UPS’s current position highlights the pressures within the marketplace as it adapts to shifting demand.