UPS gives up post-earnings gains after Q2 guidance shows tariffs to pressure margins

Shares of UPS erased gains of as much as 5% to turn down 1% in the premarket after the shipping company’s second-quarter guidance underwhelmed.

Along with its first-quarter earnings results, which beat on the top and bottom lines, management withdrew its full-year guidance. However, execs did provide guidance for the current quarter based on April’s results, which incorporates announced tariffs and the removal of the de minimis exemption.

CFO Brian Dykes said the company expects to generate $21 billion in revenues in Q2 (about $100 million shy of expectations) with an operating margin of 9.3% — which came in not only below consensus, but below the expectations of every analyst who submitted an estimate to Bloomberg.

CEO Carol Tome warned that the company experienced sequential weakness during the first quarter:

“While our revenue and volume in the first quarter was in line with our expectations, results by month were not. Starting with the US, while we expected negative average daily volume growth given our Amazon glide-down plan, January’s ADV decline was less-than-expected, marked by positive average daily volume or ADV growth in certain B2B, SMB, and health care customers. Then, as we moved into February and March, uncertainty surrounding global trade policies and other matters led to a drop in consumer confidence and muted demand from some enterprise and SMB customers. As a result, the decline in US ADV for the months of February and March was higher than we expected.”

China to US trade lanes are the shipper’s most profitable, per Tome, and that’s poised to be a pain point going forward.