ATLANTA (AP) — United Parcel Service Inc. reported a 13% drop in first-quarter profit, to $965 million, as stay-at-home orders generated deliveries to people’s homes but not enough to offset the higher costs and a drop in business deliveries.
UPS said Tuesday that it couldn’t predict the depth or duration of “significant headwinds” caused by the coronavirus outbreak, so it withdrew forecasts about future revenue and profit.
The company said it expects to cut capital spending this year by $1 billion and it is suspending share buybacks, reducing planned full-year spending on buybacks by $783 million.
The growth of stay-at-home restrictions meant the closure of many businesses that form the core of UPS’ customer base. Supply chains that also generate delivery business were disrupted. UPS said commercial ground deliveries are down sharply.
Chairman and CEO David Abney said shipments between businesses will rise as more of them reopen.
“We just don’t know when, and we don’t know how far it’s going to bounce back,” he said on a call with analysts.
Instead, the company has seen a shift to less profitable residential deliveries — now 70% of its U.S. volume — which are more costly for UPS because of the greater distances drivers must travel between stops. Drivers drove nearly 10% more miles and made 15% more stops compared with a year earlier.
UPS said net income dropped from $1.11 billion a year earlier. The Atlanta-based company said first-quarter profit, after excluding non-recurring costs, was $1.15 per share.
That fell short of Wall Street expectations. The average estimate of nine analysts surveyed by Zacks Investment Research was $1.21 per share.
UPS said revenue rose 5% to $18.04 billion, topping analysts’ forecasts. Six analysts surveyed by Zacks expected $17.42 billion.
Shares of UPS fell 6% to close at $96.43.
The shares have dropped 18% since the beginning of the year, while the Standard & Poor’s 500 index has fallen 11%.