United Parcel Service (NYSE:UPS) recently outlined ambitious targets for the year 2026 during its investor and analyst day. However, despite the optimistic long-term outlook, the company continues to grapple with challenges in the near term, including weak demand and elevated costs. Projections for the first half of 2024 anticipate a 1-2% decline in revenues year over year, with a corresponding 20-30% decrease in consolidated adjusted operating profit. These near-term headwinds led to an 8.16% decline in the stock on March 26.
Nevertheless, UPS anticipates a turnaround in the second half of 2024. Revenues are forecasted to grow by 4-8% year over year during this period, accompanied by a 20-30% increase in consolidated adjusted operating profit. For the full year, management expects consolidated revenues to range between $92 billion and $94.5 billion, aligning closely with the Zacks Consensus Estimate of $93.29 billion. Additionally, consolidated adjusted operating profit for the current year is projected to fall between $9.2 billion and $10 billion.
Carol Tomé, CEO of UPS, expressed confidence in the company’s prospects, stating, “After coming off a difficult market in 2023, the small package industry is poised to return to growth in 2024 and beyond.” She outlined plans for strategic initiatives over the next three years aimed at driving growth in premium markets while enhancing productivity and efficiency.
Looking ahead to 2026, UPS has set ambitious financial targets. The company expects consolidated revenues to range from $108 billion to $114 billion, with a consolidated adjusted operating margin surpassing 13%. Segment-specific adjusted operating margins for the U.S. Domestic Package, International Package, and Supply Chain Solutions units are projected to be around 12%, 18-19%, and approximately 12%, respectively. Furthermore, capital spending from 2024 to 2026 is estimated to be around 5.5% of total revenues.
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