TLDR
- UPS to cut 20,000 jobs and close 73 buildings to save $3.5 billion in 2025
- Q1 profit beat expectations with $1.49 adjusted EPS vs $1.38 expected
- UPS anticipates weak volumes from Amazon, its largest customer
- U.S. domestic segment revenue grew 1.4% despite volume decline
- Company not updating full-year outlook due to economic uncertainty
United Parcel Service announced plans to cut 20,000 jobs and close 73 buildings by the end of June. The move comes as the delivery giant posted better-than-expected first-quarter results and prepares for lower shipment volumes from Amazon.
UPS reported a Q1 adjusted profit of $1.49 per share, beating Wall Street expectations of $1.38.
Revenue came in at $21.5 billion, slightly below last year’s $21.7 billion but still ahead of analyst estimates of $21.05 billion.
The job cuts and building closures aim to save the company $3.5 billion in 2025. UPS expects to spend between $400 million and $600 million on separation benefits and lease-related costs.
CEO Carol Tomé addressed the changes in a statement. “The actions we are taking to reconfigure our network and reduce cost across our business could not be timelier,” she said.
Economic Pressures and Customer Changes
UPS faces several challenges in the current market. Trade has slowed following extensive tariffs implemented by President Donald Trump.
The company is also preparing for reduced volumes from Amazon, which accounted for 11.8% of UPS’s overall revenue in 2024.
In January, UPS had warned it was accelerating its plan to slash millions of deliveries for Amazon.
Another pressure point comes from the U.S. decision to collect tariffs on goods from China-linked e-commerce sellers Temu and Shein. Starting May 2, items that were previously duty-free up to $800 per sale will now face tariffs.
Despite these headwinds, the company’s U.S. domestic segment saw a 1.4% revenue increase to $14.46 billion in Q1. This growth was driven by increases in air cargo and improved revenue per piece, even as overall volumes declined.
Segment Performance
The U.S. domestic segment posted an operating profit of $979 million, with a non-GAAP adjusted operating profit of $1.01 billion. The segment’s operating margin was 6.8%, or 7.0% on an adjusted basis.
The international segment performed well with revenue increasing 2.7% to $4.37 billion. This growth was driven by a 7.1% increase in average daily volume. The segment recorded an operating profit of $641 million and an adjusted operating margin of 15.0%.
Supply Chain Solutions saw a 14.8% revenue decline to $2.71 billion. This drop was mainly due to the divestiture of Coyote. The segment’s operating margin was 1.7%, or 3.6% on an adjusted basis.
UPS is not updating its full-year outlook due to current economic uncertainty. The company had previously forecast full-year revenue of $89 billion and an operating margin of about 10.8%.
This marks the second round of major job cuts for UPS, which reduced its workforce by 12,000 jobs last year.
Analyst Jonathan Chappell of Evercore ISI noted potential market concerns. “The removal of 2025 guidance will likely create a wide range of outcomes that may be difficult to underwrite without greater macro clarity,” he said.
Investors reacted positively to the earnings report. UPS shares rose nearly 2% in pre-market trading following the announcement.
UPS continues to adapt its business model in the face of changing market conditions. The company’s focus on cost-cutting measures and network optimization reflects its strategy to maintain profitability during uncertain economic times.
The latest financial results show that UPS can still deliver solid earnings despite ongoing challenges in the shipping industry. Its ability to exceed profit expectations while implementing major structural changes demonstrates the company’s resilience.
The next few quarters will be critical as UPS implements its cost-saving measures and navigates changes in its relationship with Amazon.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
