By Kannaki Deka
(Reuters) -United Parcel Service forecast 2026 total revenue above estimates on Tuesday, as the world's largest parcel delivery company unveiled a three-year plan prioritizing high-margin parcels and aggressive cost-cutting.
Shares of the company still dropped 8.2% in afternoon trade.
"The shares were down ... suggesting 2026 guidance was slightly worse than investor expectations (including anticipated capital spending) or the market is questioning that outlook," Morningstar analyst Matthew Young said in a note.
Following a post-pandemic slowdown in e-commerce demand, the package delivery firm intends to lean on its healthcare logistics segment and small- and medium business customers to drive volume and margin growth.
"After coming off a difficult market in 2023, the small package industry is poised to return to growth in 2024 and beyond," UPS CEO Carol Tomé said on Tuesday.
Over the next three years, the company expects to spend about $6 billion on its plan, dubbed "Network of the Future", to further automate its facilities and using robotics to bag and sort packages.
"This will enable us to reduce our reliance on labor and drive the productivity flywheel, which should translate into about $3 billion in savings over 5 years with half of that by 2026," UPS CFO Brian Newman said.
Earlier this year, UPS had forecast 2024 revenue below Wall Street's target amid weak demand from its retail, manufacturing and high tech customers.
The company forecast 2026 revenue between $108 billion and $114 billion, above LSEG estimates of $102.12 billion. It expects to reach a consolidated adjusted operating margin growth of 13% by 2026.
Atlanta-based UPS said it expects total capital expenditures from 2024 to 2026 to be between $17 billion and $18 billion, about 5.5% of total revenue.