Exploring Options for Coyote Business: Insights from My MBA Career

Last Updated on January 30, 2024 by Robert C. Hoopes

UPS Plans to Cut 12,000 Jobs and Explore Strategic Options for Coyote After Disappointing Revenue Forecast

UPS, one of the world’s largest package delivery companies, has announced plans to reduce its workforce by 12,000 employees and explore strategic options for its trucking brokerage business, Coyote. This decision comes after the company forecasted full-year revenue below expectations.

Weak demand from retail, manufacturing, and high-tech customers has led to a decline in volume, revenue, and operating profit in all of UPS’s business segments. The COVID-19 pandemic and its aftermath have severely impacted UPS’s operations. CEO Carol Tome expressed hopes of finding a new way to offer Coyote’s services without the current overhead costs, as the business has experienced a significant decline in revenue since the peak of the pandemic-driven shipping boom in 2020.

The forecast for UPS’s business conditions does not show signs of improvement until the second half of 2024. The company expects full-year revenue to range between $92 billion and $94.5 billion, falling below analysts’ average target of $95.57 billion. The boom in delivery services that was driven by the pandemic has reversed as travel, concerts, and indoor dining resume. Additionally, inflationary pressures have affected e-commerce purchasing behavior.

UPS is not alone in facing the challenges of the uncertain business environment. Rival company FedEx has also had to cut its forecasts due to similar circumstances. Moreover, UPS is grappling with higher labor costs resulting from a new contract with the Teamsters union, further squeezing profits.

Despite the tough market conditions, UPS is hopeful that its average daily volume will begin to pick up in the latter half of the year. However, growth will still be constrained as customers shift to less profitable ground-based delivery options instead of air-based services.

The fourth quarter of last year proved challenging for UPS, reporting a decline in revenue for its air-based international and truck-based U.S. segments. Quarterly revenue came in at $24.9 billion, down 7.8% from the previous year, and adjusted profit fell 31.8% to $2.47 per share.

UPS remains committed to navigating these challenging times and finding innovative solutions to adapt to the changing market landscape. The company’s priority is to ensure sustainable growth and long-term success as it explores strategic options for Coyote and implements cost-cutting measures to improve overall profitability.