UPS sinks on mixed Q2 results, dip in US delivery volumes

UPS shares dropped 9% in Tuesday morning trading after the delivery giant posted mixed Q2 results and warned of ongoing pressure from a US manufacturing slump and volatile trade policies.

Earnings per share landed at $1.55, narrowly missing the $1.56 Wall Street expected. Revenue, meanwhile, came in at $21.22 billion, topping analyst forecasts of $20.8 billion, but was down 2.7% from the same quarter a year ago.

“On the commercial side of the economy, manufacturing activity in the US remains soft,” CEO Carol B. Tomé said on the company’s earnings call. These macroeconomic dynamics influenced overall market demand as well as demand from customer segment and product.

Average daily volume in the US declined 7.3% during the quarter, though UPS said its recent strategic shifts led to a better mix of business, which kept domestic revenue to just a 0.8% drop.

Internationally, the picture wasn’t much brighter.

“Trade follows policy and generally, tariffs are not good for trade,” execs said. The company cited new US tariffs and the end of the de minimis exemption as key drivers behind a 34.8% year-over-year volume drop in its China-US trade lane, its most profitable corridor, during May and June.

To offset the slowdown, UPS said it’s staying focused on cutting costs.

“...we will be closing more buildings and sort centers during the back half of this year,” the company said, reaffirming its goal to remove about $3.5 billion in base business expenses this year.

UPS declined to offer full-year revenue or operating profit guidance, but reaffirmed its plans for about $3.5 billion in capital expenditures this year.

UPS shares have now lost a quarter of their value this year.