Why UPS Stock Is Failing to Deliver Today

United Parcel Service (NYSE: UPS) saw a return to volume growth in the quarter, but higher-than-expected expenses weighed on results.

Shares of UPS traded down 12% as of 10 a.m. ET after the company reported a top- and bottom-line miss.

Volumes, and costs, are heading higher

It has been a tough 18 months for transportation companies . A surge in shipping after the height of the pandemic gave way to uncertainty about the health of the economy, causing large corporate customers to cut back on inventories and softening shipping demand and pricing.

The second quarter could have marked a turning point. UPS reported volume growth in the United States for the first time in nine quarters. But higher expenses due in part to a new labor deal UPS signed last year as well as a one-time charge to settle a regulatory matter conspired to drive earnings below consensus.

UPS earned $1.79 per share in the quarter on sales of $21.8 billion, missing Wall Street's estimate for $1.99 per share on sales of $22.2 billion. The company also revised its full-year revenue forecast to about $93 billion, from previous guidance of between $92 billion and $94.5 billion in sales.

"As expected, our operating profit declined in the first half of 2024 from what we reported last year," CEO Carol Tomé said in a statement. "Going forward we expect to return to operating profit growth."

Is UPS a buy?

UPS has a lot of moving parts right now. In addition to its internal effort to rightsize operations and improve efficiency, the company has a deal to sell its Coyote Logistics business to RXO Logistics and a separate agreement to acquire Mexican express delivery operator Estafeta.

The company also announced it was restarting its share-repurchase program , targeting $1 billion in buybacks annually.

UPS is a proven operator that plays a vital role in global supply chains and will likely have ample opportunity to perform in the years to come. But given the near-term headwinds, and the continued economic uncertainty, there is no need for investors to rush in here and buy the dip.

Lou Whiteman has positions in RXO. The Motley Fool has positions in and recommends RXO. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy .