UPS unveils cost-cutting push as tepid parcel shipment demand weighs on outlook

January 30, 2025 11:29 PM AEDT | By Investing

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UPS unveils cost-cutting push as tepid parcel shipment demand weighs on outlook

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Investing.com - UPS' revenue guidance for the 2025 fiscal year missed analysts' estimates, while the shipping giant also announced a multi-year drive to restructure its key U.S. network as it contends with signs of stagnant parcel shipment demand.

In an earnings release on Thursday, UPS flagged that the initiative would drive around $1 billion in savings "through an end-to-end process redesign", with CEO Carol Tomé noting that "business and operational changes" are already being made.

The move comes as UPS said it had reached an agreement in principle with its largest customer -- reportedly e-commerce titan Amazon (NASDAQ:AMZN) -- to lower its volume by more than 50% by the second half of 2026. It has also "insourced" 100% of its low-profit UPS SurePost offering, which had featured UPS picking up packages and then handing them off to the U.S. Postal Service for final delivery, the firm said.

These alterations will help put the company "further down the path to becoming a more profitable, agile and differentiated UPS that is growing in the best parts of the market," Tomé said.

For its current fiscal year, UPS said it expects to report revenue of around $89 billion, below Wall Street expectations for a forecast of $94.9 billion, according to Bloomberg consensus estimates. Analysts at Vital Knowledge flagged that the weaker outlook seems to stem from "a sharp drop in business from Amazon".

"They are performing well on costs and are successfully raising prices, but the Amazon volume headwind is large," the analysts said in a note to clients.

UPS posted fourth-quarter revenue of $25.3 billion, compared with projections of $25.39 billion. Diluted earnings per share came in at $2.01.

Executives had previously flagged tepid hopes for the holiday quarter due to Thanksgiving falling on a later date in November this year, which crimped the number of shopping and delivery days during the period. More customers could buy items in stores rather than online as a result, they added.

Shares in UPS were sharply lower in premarket U.S. trading following the announcement.

This article first appeared in Investing.com

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