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UPS flashes a warning sign about the US economy
Posted on 4/25/23 at 5:46 pm
Posted on 4/25/23 at 5:46 pm
quote:
America’s largest trucking company said Tuesday that revenue fell 6% in the first quarter compared to a year earlier, as its operating profit fell 22%. Its earnings fell just short of Wall Street forecasts for the period.
“In the first quarter, deceleration in US retail sales resulted in lower volume than we anticipated, and we faced ongoing demand weakness in Asia,” said the company’s earnings statement. “Given current macro conditions, we expect volume to remain under pressure.”
The company said that while January volumes were about what it had expected, the macroeconomic environment weakened, causing a 7% drop in volume in March compared to a year ago. That acceleration in the drop in volume “caused us pause,” said UPS CEO Carole Tome.
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Posted on 4/27/23 at 7:00 am to saintforlife1
quote:
That acceleration in the drop in volume “caused us pause,” said UPS CEO Carole Tome.
Aka "we have no idea what's going on"
Retail inventories have been inflated the past couple years from the pandemic stimulus and are beginning to normalize. Look to 2H2023 for restocking to begin.
Posted on 4/27/23 at 7:06 am to saintforlife1
Looks like UPS was the only Major Company to have bad earnings this Qtr. Fedex boosted their guidance for 2023. Are we due a pullback ? Yes but one company's warning should not cause concern for imminent doom and gloom that some on this board like to preach.
Posted on 4/27/23 at 8:21 am to saintforlife1
quote:
Last week JB Hunt Transportation Services (JBHT) warned that the freight trucking sector was slowing down. JBHT’s President said: “Simply stated, we’re in a freight recession.” UPS echoed their sentiment on Tuesday. First-quarter revenue for UPS fell short of expectations and 6% below last year’s level. Further, they guided forward revenue projections lower. Carol Tome, CEO, stated, “In the first quarter, deceleration in U.S. retail sales resulted in lower volume than we anticipated, and we faced ongoing demand weakness in Asia. Given current macro conditions, we expect volume to remain under pressure.” Per the WSJ, the most significant volume declines were in domestic next-day air shipments (-10.7%) and deferred services (-24.5%).
Results and statements from UPS and JBHT point to weakening demand for shipping services due to slowing economic activity. Freight activity tends to be a leading, not lagging, economic indicator. Today’s earnings release from Amazon should shed more light on shipping and the state of the consumer. Unfortunately, we must wait a few weeks for retail leaders Walmart and Target to report on earnings. Consumers have been racking up considerable credit card debt and drawing down their savings over the last year. UPS and JBHT warnings of a freight recession should be followed closely as we may be in the early innings of a consumer slowdown.
Posted on 4/27/23 at 9:04 am to saintforlife1
All that matters is how do we stand compared to 2019 or pre-covid levels.
Covid was a blip in the patterns and the world is returning to normal routine.
Covid was a blip in the patterns and the world is returning to normal routine.
Posted on 4/27/23 at 9:20 am to UpstairsComputer
quote:
Freight activity tends to be a leading, not lagging, economic indicator.
This is what concerns me the most. I have no doubt we are heading for a slowdown in spending and economic activity, particularly in the U.S. Now will that translate to a pullback in equity markets? Maybe, or maybe not. I do feel like the equity markets are out of sync with the overall economy (and yes, I 100% understand the stock market and the economy are NOT the same).
The disconnect feels real though. A pullback in U.S. stocks, if it happens, may be short-lived and not as painful as many are predicting.
Posted on 4/27/23 at 9:41 am to UpstairsComputer
Trucking is in a downturn because of elevated inventories, but the global shipping outlook is improving and expecting an upturn 2H2023.
Average container prices are bottoming out so container shipping looking like a good long opportunity.
quote:
Morgan Stanley’s (NYSE: MS) Freight Pulse showed sentiment among the group improved slightly even as data points have yet to point to an upward trajectory for freight markets. Of shippers polled, 38% said they will likely maintain current inventory levels, which was a 10-percentage-point increase from the fourth-quarter report. The number of respondents saying they need to reduce inventories also declined for the first time since the third quarter of 2021.
Nearly 75% of shippers surveyed expect inventories to normalize in 2023, with almost 50% saying it will happen in the second half of the year.
“Despite all the bad headlines and mixed datapoints on macro, our latest quarterly Shipper Survey keeps showing signs of improvement under the surface,” stated Ravi Shanker, Morgan Stanley transportation equity analyst.
quote:
“We are not sure what the macro outlook holds in store for us but what is very clear is that at the current pace of destocking, inventory levels should be normalized soon and if the consumer holds up in 2H23, conditions are ripe for a restocking upcycle (esp. if we also overcorrect on inventory destocking),” Shanker said.
quote:
MSC, the world's largest container line, says the ocean container market will grow in the second half of 2023.
The shipping company, widely seen as a barometer for global trade, says North American and Europe inventory is still high, but signs from China are encouraging.
Average container prices are bottoming out so container shipping looking like a good long opportunity.
Posted on 4/27/23 at 9:51 am to JimMorrison
quote:
MSC, the world's largest container line, says the ocean container market will grow in the second half of 2023.
The shipping company, widely seen as a barometer for global trade, says North American and Europe inventory is still high, but signs from China are encouraging.
Interesting info. Thanks for sharing. It appears the consumer is still in charge of where the economy is heading (as usual).
Posted on 4/27/23 at 10:53 am to saintforlife1
UPS also is in negotiations with the Teamsters for the largest CBA in Teamster history.
Not sure how much that impacts accounting practices on a quarterly level.
Not sure how much that impacts accounting practices on a quarterly level.
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