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A UPS truck in downtown Los Angeles. UPS posted quarterly revenue of $24.4-billion on Tuesday, beating analysts’ expectations.Mike Blake/Reuters

United Parcel Service Inc UPS-N on Tuesday reported better-than-expected quarterly earnings, but shares fell 3 per cent after executives said they expected e-commerce delivery growth – which drove its pandemic business – to cool this year.

UPS now expects volume in its biggest U.S. business to fall in the first half of 2022 before improving in the latter part of the year.

“We’re not going to see the kind of (e-commerce) growth that we experienced during COVID-19, but ecommerce sales will continue to grow,” Chief Executive Officer Carol Tome said on a conference call with analysts.

Executives said higher shipping rates, fuel surcharges and more large and small business deliveries would offset softer demand for residential e-commerce package drops – as they did in the first quarter.

Atlanta-based UPS reiterated its 2022 outlook for revenue of about $102-billion and adjusted operating margin of roughly 13.7 per cent. It also announced plans to double its 2022 share buyback target to $2-billion. Still, shares fell $5.72 to $183.92 in early trading.

Results from UPS came almost two weeks after the Commerce Department reported back-to-back declines in e-commerce sales for February and March. Pandemic-weary consumers shifted some spending from goods to services in response to the United States lifting COVID-19 prevention measures. At the same time, record gas prices bit into disposable income.

During the first quarter, average daily volume in the UPS domestic business fell 3 per cent – driven by a 7.4 per cent drop in residential deliveries. COVID-19 variant outbreaks, record gas prices and political uncertainty fuelled by Russia’s war on Ukraine drove the decline from last year’s stimulus check-fueled volume boom, executives said.

Still, UPS reported first-quarter adjusted earnings of $3.05 per share on revenue of $24.4-billion. Those results topped analysts’ average targets for earnings of $2.88 per share and revenue of $23.78-billion.

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