Economy

UPS cuts 2023 revenue outlook, cites weakening demand ahead of holiday peak

Published

7 months ago

October 27, 2023

UPS cuts 2023 revenue outlook, cites weakening demand ahead of holiday peak

By Lisa Baertlein and Priyamvada C

(Reuters) -United Parcel Service cut its 2023 revenue forecast for the second straight quarter on Thursday as delivery demand continued to soften ahead of the key holiday season, and its shares sank 5% to the lowest level in about three years.

The world’s biggest package delivery firm is caught in a profit squeeze as it also battles to win back business lost during the summer’s tumultuous U.S. labor talks, and to offset higher costs from the resulting five-year deal covering 340,000 Teamsters-represented workers in the United States.

“We expected conditions in the third quarter to be challenging, and they were,” CEO Carol Tome said on a conference call.

The year-end holiday season is the busiest period for package delivery companies. UPS customers include retailers like Amazon.com (NASDAQ:), Walmart (NYSE:) and Macy’s (NYSE:), which are bracing for U.S. holiday sales that some analysts forecast could be the slowest since 2018.

Retail reported the biggest package volume decline in the third quarter, when all industry sectors retreated, UPS executives said.

UPS now expects U.S. package volume to be down in the low- to mid-single-digit percentages by December. It previously forecast flatish year-over-year volume by year end.

“It’s weak, there’s no way around it,” said Jefferies analyst Stephanie Moore, who attributed the company’s tempered outlook to market forces rather than unique UPS challenges.

Shares of rival FedEx (NYSE:) also fell, declining 4% in midday trading.

UPS, seen as a bellwether for the U.S. economy, cut its full-year revenue forecast to $91.3 billion to $92.3 billion, down from its prior forecast of around $93 billion.

The company also reduced its projection for annual adjusted operating margin to between 10.8% and 11.3% versus 11.8% previously.

Some of the margin pressure comes from customers shifting to less lucrative ground-based delivery from faster and more profitable air-based services. E-commerce leader Amazon.com, the biggest UPS customer, is leading that trend, executives said.

The entire package delivery industry is fighting for market share as the pool of potential e-commerce deliveries shrinks. Reuters reported earlier this month that UPS and its rivals for the first time in years have been using discounts and other incentives to maintain and win market share, moves that could further pressure sector profits.

UPS said labor negotiations-related package diversions continued into the third quarter. It revised the total to 1.5 million average daily packages, up from 1.2 million previously.

Thus far, it has recouped 600,000 of those packages, with Amazon accounting for half of that regained business, executives said.

Meanwhile, UPS is investing with an eye on future growth.

The Atlanta-based company this quarter will spend more than $1 billion on healthcare specialist MNX Global Logistics and returns specialist Happy Returns to bolster package volumes, CEO Tome said.

UPS also has been cutting jobs, parking planes and leaning on package tracking and other technology to help offset falling e-commerce demand, weak export and industrial production and the cost hit from its new labor contract.

The company posted an adjusted profit of $1.57 per share in the quarter, topping analysts estimates by 5 cents, according to LSEG data.

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

5 months ago

December 26, 2023

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.

The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.

Economy

China identifies second set of projects in $140 billion spending plan

Published

5 months ago

December 25, 2023

China identifies second set of projects in $140 billion spending plan

© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo

SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.

With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.

The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.

China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.

The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.

“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.

The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.

($1 = 7.1315 renminbi)

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

5 months ago

December 25, 2023

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.