UPS announced a sharply lower profit in the third quarter, and stated that it expected lower revenue and smaller margins to come. It cited the slowing global economic situation, and not recent labor problems, as the reason for its grim forecast.
UPS reported a net profit of $1.3 billion, or $1.57 per share. This is down 48% compared to a year earlier, but better than the $1.52 per share estimate of Refinitiv's analysts.
Negotiations with the Teamsters were a major financial blow to the company. The Teamsters announced plans to strike on August 1st and did not reach a tentative labor agreement on a newcontract until one week before the deadline. The fear of a possible strike caused many major customers to shift their volumes to other services.
Carol Tome, CEO of the company, said that the volume diverted from our network during our negotiations with unions is now starting to flow back to it.
While the company's performance in the third quarter was better than expected, the company has once again reduced its revenue and profit margin forecasts for the full year.
It said that three months ago, after the tentative agreement was reached with Teamsters, they expected revenue for the full year of $93 billion, and a margin of adjusted operation of approximately 11.8%.
It said on Thursday that it is now looking at revenue between $91.3 and $92.3 billion, and an adjusted operating margin consolidated of between 10.8% to 11.3%.
This lower guidance was attributed by the company to the global macroeconomic uncertainties, and not to the lost business resulting from the labor negotiations or the cost of the new agreement. UPS trucks are an economic indicator, moving an estimated 6% US Gross Domestic Product and 3% global GDP.
In premarket trading, shares of UPS fell 3% on the lower guidance.