UPS Shares Hit Three-Month Low on Worries E-Commerce Is Cooling

United Parcel Service Inc shares fell to a three-month low on Tuesday on worries that growth from the pandemic-fueled e-commerce boom may be fading.

The company said second-quarter domestic volume fell 2.9%, with ground – composed largely of e-commerce deliveries – dropping 4% versus the year earlier.

“Investors are likely reading this as an indication the pandemic-driven demand trend is slowing,” Cowen Research analyst Helane Becker said in a client note.

The stock was down 8.8% at $191.21 in early trading, having hit a low of $191, its lowest since late April.

UPS has been a key beneficiary of the pandemic shift to online shopping. Like rival FedEx it responded to the surge in home delivery demand by adding profit-boosting surcharges.

The share price decline was despite second-quarter profit and revenue that topped Wall Street estimates.

Excluding items, UPS earned $3.06 per share, above analysts’ average estimate of $2.82, according to Refinitiv data.

Total revenue jumped 14.5% to $23.42 billion, beating a forecast $23.24 billion.

UPS forecast a 2021 consolidated operating margin of approximately 12.7%, versus 13.9% in the second quarter.

Executives said domestic package volume will be under pressure in the second half of the year as some shoppers return to in-store shopping and its customers scramble to replenish inventory at a time when goods are getting stuck in clogged seaports and rail yards.

Under Chief Executive Officer Carol Tomé, UPS has been reining in costs and focusing on high margin packages under her “better not bigger” strategy. During the second quarter, UPS reported growth in lucrative air and healthcare shipments.

Reuters