United Parcel Service, Inc. - Ordinary Shares - Class B

First Quarter Performance: - UPS reported Q1 2025 revenue of $21.5 billion, a slight decrease of 0.7% year-over-year (YOY). Operating profit increased by 0.9% to $1.8 billion, while diluted earnings per share rose by 4.2% to $1.49. The consolidated operating margin improved by 20 basis points to 8.2%. While the results were slightly better than expected overall, they showed variability in monthly performance, with January doing well but February and March falling short of forecasts.

Challenges in Volume and Demand: - Average Daily Volume (ADV) in the U.S. fell by 3.5% YOY, with ground volume declining 2.5% and air volume dropping 9.6%. The decline was attributed to rising uncertainty in consumer demand, particularly among small and medium-sized businesses (SMBs), which are less equipped to handle tariff-related changes. The company anticipates ongoing pressure on ADV, especially from SMBs, due to upcoming tariff increases projected at 145% on China goods starting May 2.

Cost Management and Efficiency Initiatives: - UPS is undertaking significant cost reduction initiatives, aiming for $3.5 billion in total cost savings in 2025 as it reduces volume delivered to Amazon by over 50% by mid-2026. The company plans operational closures, labor reductions, and enhanced automation. The first quarter achieved about $500 million of the targeted savings, with expectations for faster savings realization in the second half of the year aligned with Amazon's volume decline.