UPS Posts Q1 Profit Beat, Revenue Miss

United Parcel Service (UPS) on Tuesday released first-quarter results that surpassed analyst expectations for adjusted profit but fell short of revenue expectations.

UPS reported adjusted earnings per share (EPS) of $1.43 on adjusted net income of $1.22 billion, above the marks of $1.31 per share and $1.12 billion analysts expected, according to estimates compiled by Visible Alpha.

“Our financial performance in the first quarter was in line with our expectations, and average daily volume in the U.S. showed improvement through the quarter,” UPS Chief Executive Officer (CEO) Carol Tomé said in a statement. “Looking ahead, we expect to return to volume and revenue growth.”

However, UPS’s revenue of $21.7 billion came in slightly below analyst estimates of $21.89 billion. Lower revenue than expected while also reporting a higher profit than estimated could mean UPS is progressing in its plan to cut billions in costs to deal with drops in demand after its revenue reached record highs during the pandemic.

One common way of adjusting to the drop in demand has been to reduce costs, with UPS reporting total operating expenses down 1.4% in the first quarter compared to the same time last year.

Shipping rival FedEx (FDX) has also seen revenue decrease in recent quarters, as demand for things that require package deliveries like online shopping fell once pandemic restrictions eased.

UPS also affirmed its full-year guidance, projecting revenue of $92.0 billion to $94.5 billion and an adjusted operating margin of 10.0% to 10.6%.

In the weeks leading up to Tuesday’s earnings report, UPS made a pair of announcements that could help the company’s stock price down the road, projecting long-term revenue above expectations, and announcing that it would replace FedEx as the primary air cargo provider of the U.S. Postal Service. The change from FedEx to UPS will happen later this year once the current contract with FedEx expires in September, but UPS has not given any indications as to how big of an impact the contract will be on its finances.

UPS shares initially jumped as much as 3% in premarket trading Tuesday after the report was released, but reversed course and were trading about 1% lower an hour before the opening bell. UPS closed Monday up 1.8% at $145.36, but the stock is down more than 7% so far this year and 25% lower in the last 12 months.