United Postal Service Inc. is slimming down to grow, while rising transport volumes and stable rates helped Hapag-Lloyd post a jump in earnings before interest, taxes, depreciation and amortization (EBITDA).
UPS
“The positive momentum we saw in the third quarter continued into the fourth quarter,” UPS CEO Carol B. Tomé told investors on a Thursday morning conference call.
She said the company in 2024 grew its U.S. SMB (small and medium-sized business) penetration, with the business totaling 28.9 percent of U.S. volume, or up 30 basis points from 2023. Tomé attributed the firm’s Digital Access Program as a “big driver” of the increase.
She also said that the company continues to drive productivity through a revenue-quality lens. That resulted in the sale of its Coyote truckload brokerage business, and agreements to acquire Mexican logistics integrator Estafeta, as well as Frigo-Trans.
One concern involved its largest customer, Amazon, a business that she said in the future is projected to “drive diminishing returns.” Tomé said the e-commerce marketplace platform has been a customer for 30 years, and that “Amazon is our largest customer but it’s not our most profitable customer. Its margin is very dilutive to the U.S. Domestic business.” Because of that, UPS negotiated a significant reduction in volume, with the current agreement reducing Amazon’s volume with UPS by more than 50 percent by the back half of 2026.
“With this, we will rightsize out network and retail the volume that is nutritive for us and for our customer,” Tomé said. And effective Jan. 1, 2025, UPS will no longer use the U.S. Postal Service (USPS) for its SurePost product and will in-source the product instead. She explained that the USPS is changing its operating model, which could put the SurePost service at risk. The USPS was used for last-mile delivery.
UPS also has a new initiative dubbed “Efficiency Reimagined,” which takes a look at processes from peak hiring practices to processing payments, among other items. Tomé said the initiative “should drive approximately $1 billion in savings.” She added that all the changes are expected to give the company a U.S. Domestic operating margin of at least 12 percent by the fourth quarter of 2026. In the quarter ended, U.S. Domestic operating margin was over 10 percent.
“We are moving from a scanning network to a sensing network through our Smart package, Smart facility, RFID initiative. In 2024, we equipped nearly 60,000 US packaged cars with sensors, which represents 66 percent of our fleet,” Tomé said, explaining that the initiative eliminated 12 million manual scans per day and enhanced the package visibility for customers.
And for its Network of the Future initiative, the company accelerated facility closures, 49 in total, that resulted in the permanent closure of 11 buildings. About 63 percent of UPS’ U.S. volume flows through automated facilities, versus 60 percent in 2023, Tomé said.
For the fourth quarter, consolidated revenue rose 1.5 percent to $25.3 billion from $24.92 billion a year ago. Operating profit was up 11.2 percent to $3.1 billion, $2.01 a diluted share, from $2.79 billion, or $1.87, a year ago. On an adjusted basis, diluted earnings per share was $2.75 in the quarter. U.S. Domestic revenue rose 2.2 percent to $17.31 billion in the quarter, while international revenue rose 6.9 percent to $4.92 billion. And revenue for its supply chain solutions was down 9.1 percent to $3.07 billion, impacted by a $588 million reduction due to the sale of Coyote.
For the full year, consolidated revenue inched up to $91.07 billion, from $90.96 billion a year ago, while consolidated operating profit fell 9.9 percent to $8.89 billion from $9.87 billion in the same year-ago period.
The company expects full year 2025 consolidated revenue to be about $89.0 billion.
Hapag-Lloyd
Stronger demand for container transport helped Hapag-Lloyd post positive earnings before interest and taxes (EBIT) for the fourth quarter, compared with the year-ago fourth-quarter loss.
German shipping giant Hapag-Lloyd said fourth-quarter profits grew fourfold, helped by an increase in transport volume.
Revenues for the quarter totaled $5.4 billion, versus $4.1 billion a year ago, while EBITDA was $1.4 billion, versus $300 million a year ago. EBIT was $800 million, versus a $300 million loss in the year-ago quarter.
Transport volume were up slightly to 3.1 million per twenty-foot equivalent unit (teu), versus 3.0 million teu a year ago. Freight rate per teu was up 32 percent to $1,564, versus $1,190 a year ago.
For 2024, revenues were $20.7 billion, versus $19.4 billion in 2023. EBITDA was $5.0 billion, up from $4.8 billion in 2023. EBIT was $2.8 billion for the year, versus $2.7 billion in 2023.
The logistics giant in July raised its profit forecast as the container shipping industry benefited from elevated freight rates. The sector saw volatile freight rates last year due to the ongoing Houthi attacks on commercial vessels in the Red Sea, which forced ocean carriers to avoid the waterway. Last November, Hapag-Lloyd CEO Rolf Habben Jansen noted “very healthy demand” ahead of then U.S. President-elect Donald J. Trump’s inauguration. Some companies were moving in goods ahead of schedule in case Trump imposed tariffs on his first day in office.
And although Trump is now officially Number 47, there’s still some uncertainty ahead because no one knows exactly what the plan is for tariffs. While he’s threatened 25 percent tariffs on imports from Mexico and Canada, there’s been talk too about universal tariffs of 10 percent to 20 percent on all U.S. imports, in addition to duties ranging from 60 percent to 100 percent for China-made goods. Moreover, geopolitical challenges could give rise to volatility in freight rates, as well as increased costs.
