Shares of UPS tumbled today after the company announced plans to scale back 50% of its business with Amazon, its largest customer, while reporting fourth-quarter earnings.
Fourth-quarter revenue rose 1.5% year over year to $25.3 billion, with operating profit surging 18.1% to $2.9 billion and net income climbing 7.2% to $1.7 billion. However, full-year results were less impressive: revenue edged up just 0.1% to $91.1 billion, while operating profit and net income fell 7.4% and 13.8%, respectively.
To improve profitability, UPS outlined several strategic moves:
Reducing Amazon volumes: An agreement in principle will cut Amazon-related shipments by over 50% by mid-2026.
Bringing UPS SurePost in-house: As of January 1, UPS has fully insourced SurePost, which previously relied on the U.S. Postal Service.
Optimizing operations: The company is restructuring its U.S. network and launching an “Efficiency Reimagined” initiative to save $1 billion through end-to-end process redesigns.
UPS forecasts 2024 revenue to decline to $89 billion. CEO Carol Tomé emphasized that these changes will create a “more profitable, agile, and differentiated” company focused on high-value market segments.
The company also reported a $639 million charge in Q4, including a $506 million pension charge, $73 million in transformation costs, and other adjustments.
Following the earnings release, UPS shares had dropped more than 20% by 10:30 AM.
Q4 Segment Performance
U.S. Domestic: Revenue grew 2.2% to $17.3 billion, with operating profit up 16.1% to $1.7 billion, driven by higher revenue per package and air cargo demand.
International: Revenue increased 6.9% to $4.9 billion, with operating profit rising 14.5% to $1 billion, fueled by an 8.8% boost in daily volume.
Supply Chain Solutions: Revenue fell 9.1% to $3.1 billion due to the sale of trucking firm Coyote, but operating profit soared 62.6% to $226 million, helped by growth in air and ocean forwarding.