**UPS Reports Mixed Q3 Results Amid Major Layoffs and Cost-Cutting Initiatives**
Delivery and logistics giant UPS (NYSE: UPS) experienced a decline in both revenue and earnings in the third quarter. However, the company’s stock price surged on Tuesday, largely driven by its aggressive layoffs and cost-cutting measures.
In early trading, UPS shares jumped approximately 13% to over $100 per share but later settled around $95, still marking an 8% gain for the day. Despite this uptick, UPS stock remains down about 24% year-to-date.
### Q3 Financial Highlights
– **Revenue:** $21.4 billion, a 4% decline year-over-year. This figure surpassed analyst estimates of $20.8 billion.
– **Operating Profit:** $1.8 billion, down 10% from the prior year.
– **Adjusted Operating Profit:** $2.13 billion, up 8% year-over-year.
– **Earnings Per Share (EPS):** $1.55, down from $1.80 in Q3 2024.
– **Adjusted EPS:** $1.74, slightly down from $1.76 in Q3 2024, but beating estimates of $1.30 per share.
### Strategic Cost-Cutting Drives Profitability
The bigger story behind these results is UPS’s aggressive expense reduction efforts, which have enhanced profitability despite declining revenues.
“We are executing the most significant strategic shift in our company’s history, and the changes we are implementing are designed to deliver long-term value for all stakeholders,” said Carol Tomé, UPS CEO. “With the holiday shipping season nearly upon us, we are positioned to run the most efficient peak in our history while providing industry-leading service to our customers for the eighth consecutive year.”
### Massive Layoffs and Facility Closures
Through the first three quarters of the year, UPS has implemented approximately $2.2 billion in cost cuts and aims to reach $3.5 billion by fiscal year-end. A portion of these savings stem from the divestiture of its Coyote Logistics business late last year.
Additionally, the company has executed three major initiatives—Transformation 2.0, Fit to Serve, and Efficiency Reimagined—resulting in:
– 48,000 layoffs, including 14,000 executive positions and 34,000 operations roles.
– Closure of 93 leased and owned facilities.
These reductions come as a response to several challenges, including increased competition, inflationary pressures, and shifting consumer behaviors.
### Improving Outlook for Q4 and Beyond
Looking ahead, UPS expects fourth-quarter revenue around $24 billion, up from Q3 results, with an adjusted operating margin between 11.0% and 11.5%—an improvement over the 10% margin reported in Q3.
For the full fiscal year, UPS projects:
– Capital expenditures of approximately $3.5 billion.
– Dividend payments totaling around $5.5 billion.
– Share repurchases amounting to $1.0 billion.
### Dividend Remains Strong Amid Challenges
Despite the company’s struggles, UPS has maintained a robust dividend policy, having raised its dividend for 15 consecutive years. Currently, the dividend payout stands at $1.64 per share, offering a high yield of 7.53%.
However, investors should note the company’s dividend payout ratio sits at 86%, indicating that a significant portion of earnings is allocated to sustaining dividend payments.
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Overall, UPS is undertaking significant strategic changes aimed at long-term sustainability and efficiency, even as it navigates near-term headwinds in the competitive logistics industry.
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