UPS hits a low point

It’s like the classic Simpsons joke: Worst earnings report of your life? Worst earnings report of your life so far.

But luckily for package delivery giant UPS, this might actually be its worst earnings report—at least for awhile. That’s what David Vernon, senior transportation analyst at Bernstein, anticipated in a conversation with CNBC: “I do think this is the worst it’s going to be for UPS in the next several years,” he said.

And now that the report’s out, the numbers tell a similar story. UPS reported adjusted diluted earnings of $1.57 per share, a 47.5% dip from the third quarter of 2022. The shipping company posted consolidated revenue of $21.1 billion, a 12.8% YoY decrease.

This earnings report covered the three months ending in September, and timing matters here. UPS’s labor contract with the Teamsters was set to expire at the end of July, and workers voted in June to authorize a strike if they couldn’t reach an agreement ahead of the deadline.

In anticipation of what could have been one of the most expensive strikes in recent memory, big UPS customers swapped to other carriers, which weighed on the company this quarter, though UPS CEO Carol Tomé didn’t place the bulk of the blame there.

“While unfavorable macro-economic conditions negatively impacted global demand in the quarter, our US labor contract was fully ratified in early September and volume that diverted during our labor negotiations is starting to return to our network,” Tomé said in a statement tied to the release.

Looking ahead to the end of the year, UPS lowered its full-year forecast, citing “global macro-economic uncertainty.” The company now anticipates revenue between $91.3 billion to $92.3 billion, down from its previous forecast of $93 billion.

“One of the big surprises in the quarter was the very narrow operating margins in the US business: 4.5%. Usually, those are double-digit or close to mid-teens," Argus Research President John Eade told Yahoo Finance. “But you can see what happened with the strike negotiation, and the impact the strike negotiations had on volume. They just weren’t able to lower the fixed costs as quickly.”

Bernstein’s Vernon told CNBC that investors will be focused on the company’s confidence that it “can recover progress that they’ve made in the last couple years on margins as we move past this hyper-inflationary period caused by the contract negotiation.”