United Parcel Service Inc (NYSE:UPS) has lowered its full-year financial outlook and posted weaker-than-anticipated second-quarter revenue, as the logistics firm was hit by labor negotiations and weaker U.S. consumer spending.
In July, UPS reached a tentative deal with Teamsters-backed employees to avert a strike that had the potential to disrupt shipments of around a fourth of all U.S. parcel shipments. The Teamsters union said the UPS workers had called for better pay and working conditions, including air conditioning in new models of the group’s famous brown trucks.
Citing the “volume impact” and “costs” associated with the agreement, UPS said it now expects annual consolidated revenue to be about $93 billion and adjusted operating margin of around 11.8%. The company had previously guided for a margin of roughly 12.8% on revenue of approximately $97B.
“UPS is stronger than ever. Looking ahead, we will stay on strategy to capture growth in the most attractive parts of the market and make our global integrated network even more efficient,” said chief executive officer Carol Tomé in a statement.
Atlanta-based UPS has previously flagged the impact of a recent pullback in customer expenditures on nonessential items, saying earlier this year that macro conditions will likely keep volumes under pressure.
The concerns were illustrated in the three months ended on June 30. Domestic U.S. revenue at the parcel deliverer slipped to $14.4B, following nearly a 10% decline in average daily volume that was only partially offset by higher prices. Analysts had projected the unit would register a top-line figure of $14.8B.
Total revenue slumped by 11% to $22.06B, missing Bloomberg consensus estimates. Shares in UPS dropped 6.7% in premarket U.S. trading Tuesday.
Adjusted earnings per share of $2.54 was down from $3.29 in the corresponding quarter last year, but still topped estimates of $2.50 thanks in part to lower-than-anticipated operating expenses.