Stocks got off to a tough start on Tuesday, as market participants looked closely at the latest slate of earnings results. Although key players in the technology industry will report earnings later this week, some other areas have failed to inspire confidence among those watching stocks. As of shortly before midday, major market benchmarks were down as much as 1%.
Leading the way lower were a couple of megacap companies that are representative of two important industries. United Parcel Service (UPS -0.45%) is a stalwart of the shipping industry, and its numbers say a lot about whether the e-commerce side of the consumer retail economy is firing on all cylinders. Meanwhile, Danaher (DHR -0.40%) gave its reading on the healthcare sector.
Investors weren't happy with either one of these financial reports. Read on to learn why.
UPS sees a slowdown
Shares of United Parcel Service dropped 9% at midday on Tuesday. The shipping giant's first-quarter financial results showed significant deterioration from year-ago levels, and while some of that was likely due to easing pandemic conditions pushing shoppers back to brick-and-mortar stores, shareholders didn't seem convinced that the impact might be temporary in nature.
Key metrics at UPS were all down. Revenue of $22.9 billion dropped 6% year over year. Operating profit was down an even sharper 23% on an adjusted basis compared to year-ago levels. That pushed adjusted earnings lower to $2.20 per share, 28% below what UPS earned in the first quarter of 2022.
Looking more closely at the numbers, there were mixed trends within UPS' business. Average daily volume was down, but UPS was able to boost revenue per item shipped in its domestic segment. The shipper's supply chain solutions segment saw the steepest sales declines, with revenue off 22.5% from year-ago figures.
Most troubling, however, was UPS' outlook. Citing further deterioration in consumer behavior and macroeconomic conditions, the shipping company said it expects to see full-year revenue and operating margin figures to come in at the lower end of the ranges in its previous guidance. UPS hopes to see $97 billion in revenue and continue to maintain healthy dividend payments and stock buyback activity. Shareholders, however, seem concerned about whether that will prove to be sustainable if the economy does in fact sink into recession.
Danaher deals with the downturn
Elsewhere, shares of Danaher moved 6% lower. The healthcare company also saw declines in key business metrics in the first quarter of 2023, which could signal ongoing weakness for the remainder of the year.
Danaher's revenue sank 7% year over year to $7.17 billion, with the company pointing to lower COVID-19-related sales offsetting a 6% rise in what the company calls its base business core revenue. Net income slumped 15% to $1.43 billion, and that resulted in adjusted earnings of $2.36 per share, down from $2.76 per share in the year-ago period.
Like many companies, Danaher aimed to make the most of a tough situation. As CEO Rainer Blair put it, the company did well in what it called a "challenging operating environment." Yet investors don't seem entirely satisfied with calls for continued high-single-digit percentage growth in Danaher's base business core sales, particularly given the recent drop in profits.
Between plans to spin off its environmental and applied sciences platform and failed efforts to acquire contract drug manufacturer Catalent, Danaher is facing some questions about its longer-term strategic direction. It will need to show improvement in order to give investors the confidence they want to have in Danaher's future.
