Despite surpassing revenue forecasts, United Parcel Service experienced a slight dip in its second-quarter earnings per share, reflecting the current complexities within the global economic landscape. The Atlanta-based company achieved $21.2 billion in revenue, exceeding the anticipated $20.87 billion, yet adjusted earnings per share reached $1.55, just shy of the $1.57 consensus. Operating profit stood at $1.8 billion, or $1.9 billion on an adjusted basis, demonstrating an improvement in the adjusted consolidated operating margin to 8.8% from the previous quarter's 8.2%. The domestic segment saw a minor revenue decrease of 0.8% to $14.08 billion, primarily due to reduced package volumes, though its operating margin remained stable. Conversely, the international segment reported a 2.6% revenue increase to $4.49 billion, boosted by a rise in average daily volume, despite a decline in its adjusted operating margin. The Supply Chain Solutions division also saw a revenue reduction, largely influenced by the sale of its freight brokerage unit, Coyote, in the prior year, yet it managed to enhance its adjusted operating margin. For the initial half of 2025, UPS generated $2.67 billion in operating cash flow and $742 million in free cash flow, while facing a 6.1% increase in GAAP cost per piece and a decrease in daily U.S. package volume to 16.6 million.
Leadership at UPS acknowledges the dynamic and evolving trade environment, highlighting ongoing strategic initiatives aimed at operational streamlining and cost reduction. CEO Carol Tomé commended the company's workforce for navigating these challenges, emphasizing the "Transformation 2.0," "Fit to Serve," and "Network Reconfiguration" programs, which encompass workforce adjustments, technological advancements, and facility consolidations. These efforts are projected to yield $3.5 billion in savings by 2025, with associated expenses ranging from $400 million to $650 million. A significant factor impacting performance has been the China-U.S. trade route, where increased tariffs and the removal of certain exemptions led to a 34.8% drop in average daily volume during May and June—a decline greater than anticipated. Domestically, low consumer sentiment contributed to an unfavorable U.S. small package market, impacting services like the Ground Saver product, which saw a 23% volume decrease, partly due to Amazon's shifting delivery strategies. The company anticipates an accelerated decline in Amazon volume for the latter half of the year, expecting approximately a 30% year-over-year decrease in both the third and fourth quarters. Uncertainty regarding U.S. trade policies has also delayed customers in finalizing their peak season delivery plans, adding another layer of complexity to future projections.
Amidst a climate of macroeconomic uncertainty, UPS has opted to withhold its revenue and profit guidance for 2025, signaling caution. Nevertheless, the company reaffirmed its commitment to key financial objectives, including its $3.5 billion cost-saving target from network optimization and efficiency programs. Capital expenditures are expected to remain at $3.5 billion, and dividend payments are projected at $5.5 billion, subject to board approval, while $1 billion in share buybacks have already been executed. The current market conditions reflect the challenges faced by UPS, with shares experiencing a decline in premarket trading. This period of adjustment underscores the importance of adaptability and strategic foresight in navigating global trade complexities and economic fluctuations. The company's ongoing efforts to streamline operations and enhance efficiency are critical steps towards fostering resilience and sustainable growth in a continually changing marketplace.