UPS PROFIT TOPS ESTIMATES AS EFFICIENCY PUSH COUNTERS COSTS

(Bloomberg) -- United Parcel Service Inc. reported profit higher than analysts’ estimates as the courier’s headcount management and restructuring of its delivery routes began to bear fruit.

Adjusted first-quarter earnings were $1.43 a share, the Atlanta-based company said Tuesday in a statement. Analysts had forecast $1.30 a share on average in estimates compiled by Bloomberg. UPS maintained its guidance for the full year.

The shares rose as much as 3% at the New York market open, their biggest intraday gain since Feb. 6. They had fallen 7.5% this year through Monday’s close.

“Average daily volume in the U.S. showed improvement through the quarter,” Chief Executive Officer Carol Tomé said in the statement. “Looking ahead, we expect to return to volume and revenue growth.”

Tomé is trying to expand sales and profit amid soft demand for package delivery coming out of the pandemic. UPS last month said it expects consolidated revenue to climb as high as $114 billion in 2026, up 25% from last year.

The company announced a deal this month with the US Postal Service to become its primary air cargo provider, replacing competitor Fedex Corp. after 22 years. The pact takes effect later this year.

Strategic Plan

The growth push follows a strategic plan earlier in Tomé’s tenure to become “better not bigger,” an initiative to focus on more profitable business potentially at the expense of volume growth. The effort helped UPS’ market value roughly double in her first two years. The courier has faced increased competition lately, while inflation has also been a challenge.

UPS is contending with higher labor costs after agreeing to a new union deal last year that raises wages and benefits over five years, with the biggest increase coming in 2024. The deal also sees upward adjustments to pension and health benefits and other expenses, including a new paid holiday.

UPS said in January that it would cut 12,000 white-collar jobs — about 14% of its full- and part-time managers — to reduce costs. The efficiency push is being aided in part by new technologies including artificial intelligence, the company has said.

It also is in the process of a strategic review of the Coyote truck brokerage business, which could result in a sale. UPS bought the business for $1.8 billion in 2015.

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