This sound is generated automatically. Let us know if you have any feedback.
Dive Brief:
- UPS could sell or make changes to trucking business Coyote Logistics after a big fourth-quarter earnings beat, UPS CEO Carol Tomé said on an analyst call Tuesday. The company published a $84 million impairment charge related to Coyote, an earnings report said.
- “We intend to explore strategic alternatives for the trucking business known as Coyote.” Tomé said, noting concerns about significant volatility in a highly cyclical business.
- The unit continued to face pressure in the quarter from excess capacity in the market, UPS CFO Brian Newman said on the earnings call.
Dive Insight:
UPS is considering strategic alternatives for Coyote, which could include selling the business.
Options include keeping the service without all the overhead, Tome said, but she also acknowledged that “maybe the business is worth more to someone else than to us.”
The package delivery company acquired Coyote in 2015 to diversify, but Tomé suggested UPS didn’t fully grasp at the time the extent of the business’ cyclical nature.
During the COVID-19 pandemic, Coyote reached $4 billion in revenue, Tomé noted. “It’s come down a lot since then,” he said.
When UPS acquired Coyote, it hailed the deal for its ability to offer synergies, with which the brokerage could leveraging UPS trucks.
However, 2023 revenue for the company’s Supply Chain Solutions division fell $3 billion, or nearly 20%, to $13 billion, according to a financial situation. In the supply chain segment, “Coyote accounted for 38% of the decline for the year and 48% of the decline for the fourth quarter,” Tomé said.
The transportation company’s Supply Chain Solutions segment, which includes truck brokerage as well as shipping, logistics and distribution services, recently reached record operating profit levels. The scored $1.7 billion both 2021 and 2022, but then operating profits fell by more than half in 2023 to $834 million.
Noting other issues with its profits, UPS is also drawing up detailed profit-related plans to reduce its workforce by 12,000 seatswith 75% of layoffs occurring in the first half of 2024.