Parcel delivery company UPS (NYSE:UPS) met Wall Street’s revenue expectations in Q4 CY2024, with sales up 1.5% year on year to $25.3 billion. On the other hand, the company’s full-year revenue guidance of $89 billion at the midpoint came in 6.3% below analysts’ estimates. Its non-GAAP profit of $2.75 per share was 8.6% above analysts’ consensus estimates.
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United Parcel Service (UPS) Q4 CY2024 Highlights:
- Revenue: $25.3 billion vs analyst estimates of $25.35 billion (1.5% year-on-year growth, in line)
- Adjusted EPS: $2.75 vs analyst estimates of $2.53 (8.6% beat)
- Management’s revenue guidance for the upcoming financial year 2025 is $89 billion at the midpoint, missing analyst estimates by 6.3% and implying -2.3% growth (vs 0.2% in FY2024)
- Operating Margin: 11.6%, up from 9.9% in the same quarter last year
- Free Cash Flow Margin: 8.8%, up from 1.6% in the same quarter last year
- Market Capitalization: $114.2 billion
“I want to thank all UPSers for their hard work and efforts as we closed out 2024 with an outstanding peak, delivering best-in-class service and strong financial results ahead of our targets for the quarter,” said Carol Tomé, UPS chief executive officer.
Company Overview
Trademarking its recognizable UPS Brown color, UPS (NYSE:UPS) offers package delivery, supply chain management, and freight forwarding services.
Air Freight and Logistics
The growth of e-commerce and global trade continues to drive demand for expedited shipping services, presenting opportunities for air freight companies. The industry continues to invest in advanced technologies such as automated sorting systems and real-time tracking solutions to enhance operational efficiency. Despite the advantages of speed and global reach, air freight and logistics companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, United Parcel Service’s sales grew at a sluggish 4.2% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector and is a poor baseline for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. United Parcel Service’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 4.7% annually. United Parcel Service isn’t alone in its struggles as the Air Freight and Logistics industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time. 
This quarter, United Parcel Service grew its revenue by 1.5% year on year, and its $25.3 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 4.1% over the next 12 months. While this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.
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Operating Margin
United Parcel Service has managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 11%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.
Analyzing the trend in its profitability, United Parcel Service’s operating margin might have seen some fluctuations but has generally stayed the same over the last five years, highlighting the long-term consistency of its business.
This quarter, United Parcel Service generated an operating profit margin of 11.6%, up 1.6 percentage points year on year. The increase was a welcome development and shows its expenses recently grew slower than its revenue, leading to higher efficiency.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
United Parcel Service’s flat EPS over the last five years was below its 4.2% annualized revenue growth. However, its operating margin didn’t change during this timeframe, telling us that non-fundamental factors such as interest and taxes affected its ultimate earnings.
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For United Parcel Service, its two-year annual EPS declines of 22.8% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.
In Q4, United Parcel Service reported EPS at $2.75, up from $2.47 in the same quarter last year. This print beat analysts’ estimates by 8.6%. Over the next 12 months, Wall Street expects United Parcel Service’s full-year EPS of $7.72 to grow 12.9%.
Key Takeaways from United Parcel Service’s Q4 Results
It was encouraging to see United Parcel Service beat analysts’ EPS expectations this quarter. On the other hand, its full-year revenue guidance missed significantly. This outlook is weighing on shares. The stock traded down 6.3% to $125.33 immediately following the results.
United Parcel Service may have had a tough quarter, but does that actually create an opportunity to invest right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
