Shares of United Parcel Service (NYSE: UPS) plummeted in the pre-market trading Thursday after the world’s leading package delivery firm lowered its full-year sales outlook in the wake of a prolonged labor dispute and associated disruptions that led to the loss of clients.
United Parcel Service (NYSE: UPS) had reported stronger-than-expected third-quarter earnings just yesterday. The third-quarter earnings came in at $1.57 per share, marking a 47.5% decline from the previous year. However, this figure beats the Street consensus forecast of $1.52 per share. Group revenues fell by 12.7% to $21.1 billion, missing analysts’ estimates of a $21.46 billion tally.
The domestic segment revenues fell by 11.1% to $13.66 billion, while revenue-per-piece, a key industry metric, increased by 2%. On the international front, revenues saw an 11% decrease, amounting to $4.27 billion, and supply chain solutions sales plummeted by 21.4% to $3.13 billion.
The company cited weakening macroeconomic conditions as a factor that impacted demand during the third quarter. It also pointed out that volumes diverted during its labor dispute with the International Brotherhood of Teamsters union are slowly returning to the network.
UPS has downgraded its full-year revenue expectations to $91.3-92.3 billion, down from its previous estimate of $93 billion. Additionally, the company expects narrower profit margins, ranging from 10.8% to 11.3%.
Market reaction to the news was immediate and profound. UPS shares saw a significant drop of 4.59% in pre-market trading, pointing to an opening bell price of $140.19 each.
The labor dispute between UPS and the Teamsters concluded in late August following the ratification of a new five-year, $30 billion labor contract. The agreement includes substantial wage increases, with part-time workers set to earn $21 an hour, marking a 35.5% boost from previous levels. Moreover, some drivers will have the opportunity to earn up to $49 per hour, with maximum annual wages reaching $175,000 by the end of the five-year term.
Teamsters President Sean O’Brien highlighted the positive impact of the agreement, stating,
“This contract will improve the lives of hundreds of thousands of workers. Teamsters have set a new standard and raised the bar for pay, benefits, and working conditions in the package delivery industry.”