By Dean Seal

United Parcel Service expects revenue to decline this year and is cutting volumes with its largest customer, Amazon.com, by more than half, sending shares sharply lower Thursday.

The Atlanta parcel carrier said it expected revenue to come in at about $89 billion for 2025, down from $91.1 billion last year. This is below the $95 billion expected by analysts polled by FactSet.

The company said it had reached an agreement in principle with its top customer to lower volume by more than 50% by the second half of 2026. In its 2023 annual report, UPS said Amazon and its affiliates accounted for 11.8% of total revenue and listed changes in its relationship with the e-commerce giant as a risk factor.

Shares were down 12.7% at $116.74 in premarket trading. This time a year ago, they were trading around $145.

UPS also said it would reconfigure its U.S. network and insource deliveries through SurePost, a home-delivery service for smaller packages that previously was coordinated with the U.S. Postal Service. UPS ended its arrangement with the Postal Service on Jan. 1.

"We are making business and operational changes that, along with the foundational changes we've already made, will put us further down the path to becoming a more profitable, agile and differentiated UPS that is growing in the best parts of the market," Chief Executive Carol Tomé said.

Evercore ISI analysts Jonathan Chappell and Alex Johnson said the SurePost insourcing deal was well known but that the volume reduction with Amazon was a surprise.

"UPS will realign its network for this volume loss, but the speed at which it will unfold will negatively impact near-term results," the analysts said.

The company's 2025 guidance includes an operating-margin target of about 10.8%, which would be an increase from the 9.3% UPS hit in 2024.

UPS also said Thursday that revenue rose 1.5% to $25.3 billion in the fourth quarter, just missing analyst forecasts for $25.41 billion.

Domestic package revenue, which makes up more than two-thirds of the total top line, was up 2.2% as it made more revenue per piece shipped and saw increases in air cargo. International revenue rose 6.9% from a jump in average daily volume.

Earnings came in at $1.72 billion, or $2.01 a share, up from $1.61 billion, or $1.87 a share, in the same quarter a year earlier.

Stripping out one-time items, quarterly adjusted earnings were $2.75. Analysts polled by FactSet had been expecting $2.53 a share.

The disappointing outlook comes after UPS had shown signs of a turnaround. In the third quarter, the company returned to revenue and profit growth for the first time in over a year.

Write to Dean Seal at dean.seal@wsj.com

(END) Dow Jones Newswires

January 30, 2025 08:03 ET (13:03 GMT)

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