UPS Explores Strategic Alternatives for Coyote Logistics Amid Market Challenges
United Parcel Service (UPS) is exploring options, including a potential sale, for its brokerage unit, Coyote Logistics. CEO Carol Tomé expressed concerns about Coyote's vulnerability to fluctuations in the trucking market and its impact on UPS's earnings. During the pandemic's early years, freight brokerage activity thrived due to surging demand for trailer space. However, since 2022, freight brokerages have faced challenges due to a prolonged decline in freight volumes.
Revenue for UPS's supply chain solutions business unit, which includes Coyote, fell by nearly 20% in 2023 compared to the previous year. Although exact financial data for Coyote isn't disclosed, Tomé noted that Coyote was responsible for a significant portion of the unit's decline.
Coyote Logistics was among the top ten largest freight brokers in the U.S. by revenue in 2022. UPS acquired Coyote for $1.8 billion in 2015 to enhance efficiency and earnings. While Coyote's revenue peaked during the pandemic at over $4 billion, it declined when freight volumes dropped last year. Industry experts suggest that freight brokerage, in the long run, remains a promising sector, with potential for growth and success beyond the current challenges.
WHY IS THIS IMPORTANT FOR MY INDUSTRY?
Coyote Logistics is a big player in the world of matching loads with available trucks. If they sell or make changes, it could send ripples across the industry… affecting how competition works and the services you can get. The hiccups Coyote Logistics is facing tell us a lot about what's happening in the wider market. Freight brokerages like them are like canaries in the coal mine, showing us how bumpy or smooth the road is ahead.
Coyote's struggles remind us that supply chains can be pretty unpredictable.
🔥 OUR HOT TAKE?
UPS seems to be playing a high-stakes game of "To sell or not to sell, that is the question" with its brokerage unit. CEO Carol Tomé seems to be singing a rather gloomy tune. Back in the pandemic's heyday, Coyote was the king of the freight brokerage hill, raking in the bucks as demand for trailer space went through the roof. But lately, it's been more like a country song gone sour – revenues down, UPS's earnings down, and Coyote getting the blame.
You may be able to see a silver lining in the clouds, though. The freight brokerage business still has plenty of road ahead. It's like an old reliable pickup truck – it may hit a few potholes, but it keeps on truckin'.
United Parcel Service (UPS) reported a disappointing start to the year with first-quarter earnings revealing a 5.3% drop in revenue and a 31.5% plunge in operating profit compared to last year.