UPS falls as lower volumes, higher costs blunt rising rates

United Parcel Service Inc.’s package deliveries fell in the first quarter, pressuring shares even as price increases helped the company post profit above expectations.

Adjusted earnings were $3.05 a share in the period, the Atlanta-based courier said in a statement Tuesday. Analysts had predicted $2.88. Revenue rose 6.4% to $24.4 billion.

The results are an indication of the challenge UPS is facing as the e-commerce boom during the Covid-19 pandemic starts to recede. Russia’s war in Ukraine also threatens to dampen global growth and costs rise on everything from labor to tires to fuel.

“Our average daily volume fell short of our plan due to several external factors,” Chief Executive Officer Carol Tome said on a conference call with analysts. “But we remain focused on controlling what we can control.”

Shares of UPS fell 3.3% at 10:20 a.m. New York time.

The company raised prices and focused more on higher-paying small businesses during the period. Average package volume dropped 3.6% from a year earlier, though the company made up for that with a 9.4% gain in revenue per parcel. The pricing power helped UPS increase adjusted operating margin to 13.6% from 12.9% a year earlier. 

UPS plans to double share repurchases this year to $2 billion, and the company reiterated a 2022 revenue goal of $102 billion. Adjusted operating margins are still seen at about 13.7%.