Sign in
UP

UNITED PARCEL SERVICE INC (UPS)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered revenue growth, margin expansion, and double‑digit non‑GAAP EPS growth: Revenue $25.3B (+1.5% y/y), GAAP operating margin 11.6% and non‑GAAP operating margin 12.3%, non‑GAAP diluted EPS $2.75 (+11.3% y/y) .
  • Management announced three major actions: accelerate glide‑down with largest customer (>50% volume reduction by H2 2026), insource 100% of SurePost effective Jan 1, and reconfigure U.S. network with “Efficiency Reimagined” targeting ~$1.0B in savings; 2025 consolidated guidance: revenue ~$89B, operating margin ~10.8% .
  • International strength (ADV +8.8%, margin 21.6% non‑GAAP) offset softness in Supply Chain Solutions from Coyote divestiture; U.S. Domestic margin topped 10% non‑GAAP on revenue per piece improvement and cost control .
  • SPGI consensus estimates for Q4 2024 EPS and revenue were unavailable due to S&P daily limit; internal targets were exceeded and management emphasized pricing discipline and margin trajectory into 2025–2026 .
  • Stock narrative catalysts: re‑mix away from dilutive volume, SurePost insourcing/service quality, International export momentum, and multi‑year cost‑out plan; watch execution of building closures, capacity rightsizing, and revenue per piece trends .

What Went Well and What Went Wrong

What Went Well

  • U.S. Domestic margin exceeded 10% (non‑GAAP) on improved revenue quality and strong expense control; revenue per piece rose 2.4% y/y and cost per piece increase held to 0.9% .
  • International saw broad‑based ADV growth (+8.8%), with operating margin of 21.6% (non‑GAAP); Asia exports +15.4%, Germany export ADV +8.6% y/y .
  • Peak service execution: UPS led industry on on‑time performance during peak; “for the seventh year in a row, we were the industry leader in on‑time service during peak season” (CEO) .

What Went Wrong

  • Supply Chain Solutions revenue declined 9.1% y/y due to Coyote divestiture; non‑GAAP operating profit fell vs prior year and margin compressed in part from mail innovations/purchase transportation dynamics .
  • GAAP results were burdened by $639M after‑tax charges: MTM pension $506M, transformation $73M, impairments $46M, and a $14M multiemployer pension plan withdrawal .
  • Consolidated “Other income (expense)” worsened to $(799)M in Q4 (vs $(414)M last year), reflecting pension mark‑to‑market and interest expense, partially offset on a non‑GAAP basis .

Financial Results

Consolidated sequential progression (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Billions)$21.8 $22.2 $25.3
Operating Margin (GAAP)8.9% 8.9% 11.6%
Operating Margin (Non-GAAP)9.5% 8.9% 12.3%
Diluted EPS (GAAP)$1.65 $1.80 $2.01
Diluted EPS (Non-GAAP)$1.79 $1.76 $2.75

Year-over-year comparison

MetricQ4 2023Q4 2024
Revenue ($USD Billions)$24.9 $25.3
Operating Margin (GAAP)9.9% 11.6%
Operating Margin (Non-GAAP)11.2% 12.3%
Diluted EPS (GAAP)$1.87 $2.01
Diluted EPS (Non-GAAP)$2.47 $2.75

Segment breakdown (Q4)

SegmentRevenue ($USD Millions)Operating Profit (GAAP, $USD Millions)Operating Margin (GAAP)Operating Profit (Non-GAAP, $USD Millions)Operating Margin (Non-GAAP)
U.S. Domestic$16,939 (Q4’23) → $17,312 (Q4’24) $1,448 (Q4’23) → $1,681 (Q4’24) 9.7% (Q4’24) $1,580 (Q4’23) → $1,754 (Q4’24) 10.1% (Q4’24)
International$4,606 (Q4’23) → $4,923 (Q4’24) $890 (Q4’23) → $1,019 (Q4’24) 20.7% (Q4’24) $899 (Q4’23) → $1,062 (Q4’24) 21.6% (Q4’24)
Supply Chain Solutions$3,372 (Q4’23) → $3,066 (Q4’24) $139 (Q4’23) → $226 (Q4’24) 7.4% (Q4’24) $308 (Q4’23) → $284 (Q4’24) 9.3% (Q4’24)

KPIs (Q4)

KPIQ4 2023Q4 2024
Consolidated ADV (‘000)25,873 26,109
U.S. Ground ADV (‘000)18,921 19,310
U.S. Air Next Day ADV (‘000)1,933 1,863
U.S. Air Deferred ADV (‘000)1,595 1,209
International Export ADV (‘000)1,771 1,978
Consolidated Avg Revenue/Package$13.11 $13.44
U.S. Domestic Avg Revenue/Package$11.96 $12.25
U.S. Domestic Cost per Piece (GAAP)$10.94 $11.00
U.S. Domestic Cost per Piece (Non‑GAAP)$10.85 $10.95

Non-GAAP adjustments (Q4 2024)

ItemAfter-tax amount ($USD Millions)EPS impact
MTM Pension Adjustment$506 $0.59
Transformation Strategy Costs$73 $0.08
Goodwill & Asset Impairment$46 $0.05
Multiemployer Pension Plan Withdrawal$14 $0.02
Total adjustments$639 $0.74

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated RevenueFY 2025Not previously provided≈$89.0B New guidance
Consolidated Operating MarginFY 2025Not previously provided≈10.8% New guidance
CapexFY 2025Not previously provided≈$3.5B New guidance
DividendsFY 2025Not previously provided≈$5.5B (subject to Board) New guidance
Share RepurchasesFY 2025Not previously provided≈$1.0B New guidance
Effective Tax RateFY 2025Not previously provided≈23.5% New guidance
U.S. Domestic RevenueFY 2025Not previously provided~‑2.3% y/y; ADV ~‑8.5%; RPP ~+6%; margin ~8.8% New segment guidance
International RevenueFY 2025Not previously provided~+2.5% y/y; margin ~18.6% New segment guidance
Supply Chain Solutions RevenueFY 2025Not previously provided≈$11B; margin ≈8.5% New segment guidance

Earnings Call Themes & Trends

TopicQ2 2024 (prior two)Q3 2024 (prior one)Q4 2024 (current)Trend
Pricing & Revenue QualityRPP down; adjusted margin 9.5%; 2024 consolidated guidance refreshed RPP trend improved; base rates added +170bps; adjusted margin 8.9% U.S. RPP +2.4% y/y; strong GRI/holiday surcharge keep rates Improving pricing discipline; RPP inflecting positive
Network of the Future/ClosuresCapex ~$4B, productivity focus 45 operational closures; 9 buildings shut; cost per piece down 4% Reconfiguration underway; up to 10% buildings may close; ~$1B savings targeted Accelerating footprint rationalization
USPS Air CargoOnboarding plan; contract start Oct 1 Full onboarding by Oct 1; positive margin on consolidated basis Confirmed smooth peak planning with USPS leadership Now embedded; operational coordination in peak
SurePost StrategySunday delivery/agreements under discussion Negotiations timing around year end 100% insourced as of Jan 1; 9.9% rate increase; minimal financial impact cited Insourced; service control and density benefits
Largest Customer (Amazon)Ongoing glide down noted Dilutive margin; air decline attributable; fit‑to‑serve offsets Agreement to lower volume >50% by H2’26; capacity will be removed in lockstep Accelerated mix shift away from dilutive volume
International ExportsMixed macro; optimization Broad export strength; Asia +15.4%, Germany +8.6% ADV +8.8%; margin 21.6% (non‑GAAP) Sustained momentum despite macro
Healthcare LogisticsContinued investments; Premier product $2.5B healthcare revenue (Q3); Frigo‑Trans deal Completed cold‑chain acquisitions; building European cross‑docks Scaling complex healthcare

Management Commentary

  • “We’ve reached an agreement in principle with our largest customer for a significant reduction in volume, lowering their volume with us by more than 50% by the second half of 2026.” (CEO) .
  • “Effective this year, on January 1, we no longer use USPS for our SurePost product… by in‑sourcing this product, we can be certain with the right service with no material impact to our financial performance.” (CEO) .
  • “We are reconfiguring our U.S. network and have launched multiyear initiatives we’re calling Efficiency Reimagined, which… should drive approximately $1 billion in savings.” (CEO) .
  • “We expect to expand U.S. Domestic operating margin in every quarter of 2025… approaching 9% for the full year; by Q4 2026 we expect ~12% U.S. margin.” (CFO) .
  • “Our second quarter results reflect both the complexity of the landscape and the strength of our execution… making meaningful progress on our strategic initiatives.” (CEO ahead of 2Q25) .

Q&A Highlights

  • Amazon glide‑down and cost removal: Management emphasized the dilutive nature of the account and ability to “reduce capacity 1‑for‑1 with the volume drop,” avoiding price chasing and preserving pricing discipline .
  • SurePost insourcing: 50% of SurePost was already redirected in Q4; insourcing leverages matching algorithms to add density with minimal miles added; implemented 9.9% rate increase .
  • Pricing environment and RPP: UPS sees rational competition; RPP improvement driven by base rates, mix shift to premium and SMB wins, and pricing tech (“Architecture of Tomorrow,” Deal Manager) .
  • Capex and buybacks: Capex ≈$3.5B in 2025; buybacks ≈$1B, potentially debt‑financed given yield/cost trade‑off; dividend payout optics distorted by non‑cash pension expense .
  • Peak operations: Less need for leased equipment; reliance on variable costs; service leadership maintained .

Estimates Context

  • SPGI consensus EPS and revenue estimates for Q4 2024 were unavailable due to S&P Global daily request limits; therefore, a formal beat/miss versus consensus cannot be presented. UPS noted it delivered “strong financial results ahead of our targets for the quarter,” but those are internal targets, not Wall Street consensus .
MetricConsensus (Q4 2024)Actual (Q4 2024)
Revenue ($USD Billions)Unavailable (SPGI limit)$25.3
Diluted EPS (GAAP, $)Unavailable (SPGI limit)$2.01
Diluted EPS (Non‑GAAP, $)Unavailable (SPGI limit)$2.75

Key Takeaways for Investors

  • Mix shift and margin path: Accelerated glide‑down of dilutive largest‑customer volumes and network rightsizing should elevate revenue per piece and U.S. margins in 2025, with a path to ~12% by Q4 2026; monitor closure cadence and cost‑out realization .
  • SurePost insourcing is a service and density lever: Full insourcing with matching algorithms improves control and efficiency with limited incremental miles; a 9.9% rate uplift supports RPP .
  • International resilience: Broad export momentum and disciplined cost control sustained 20%+ margins; watch Asia–Europe lanes and surcharge normalization .
  • Healthcare expansion: Completed cold‑chain acquisitions and new European cross‑docks build complex logistics capability; healthcare revenue target trajectory strengthens the medium‑term thesis .
  • Non‑GAAP volatility: MTM pension and transformation charges materially affect GAAP results; non‑GAAP margins/earnings show underlying performance—use both lenses .
  • 2025 guide implies disciplined pricing over volume: Consolidated margin ~10.8% on ~$89B revenue reflects pricing architecture, SMB focus, and capacity rightsizing; near‑term volume declines are strategic .
  • Trading setup: Near‑term narrative hinges on execution of reconfiguration and RPP trajectory; catalysts include quarterly domestic margin expansion, segment progress toward guidance, and updates on building closures and workforce reductions .