United Parcel Service Inc.’s shares tumbled the most in more than 15 years after the parcel giant reported a profit well short of Wall Street’s estimates amid pressure from wage inflation and soft package demand.

Adjusted second-quarter earnings were $1.79 per share, the parcel giant said Tuesday in a statement. Analysts had predicted $1.98 a share on average, according to estimates compiled by Bloomberg. Revenue was also short of expectations.

The results mark a setback for UPS as it contends with higher labor costs in an environment of weakened demand following a pandemic-driven boom in e-commerce deliveries. Investors also had already raised questions over whether the company could its achieve a longer-term sales goal announced in March. 

“We think this quarter represents a further leg down on investor sentiment for the stock,” Jefferies analyst Stephanie Moore wrote in a research note.

UPS shares fell more than 11% after markets opened in New York on Tuesday, their largest intraday drop since October 2008. The stock had declined 7.7% this year through Monday’s close. 

The courier has sought to reduce spending while focusing on growing operating margin in the coming years. UPS revealed a plan in January to save $1 billion by cutting 12,000 management jobs. The Atlanta-based company has said labor expenses would be front-loaded in the new Teamsters union contract, agreed to about a year ago. 

Average daily package volume in the second quarter rose slightly to 20.93 million, narrowly missing the 20.96 million analyst estimate. 

Although the company had anticipated a decline in operating profit, volume grew for the first time in nine quarters, which Chief Executive Officer Carol Tomé called “a significant turning point for our company.”

USPS Contract

A new contract with the US Postal Service could bring an additional boost in the second half of the year. The third and fourth quarters also bring peak shipping demand — and demand surcharges — around holiday season.

UPS narrowed its revenue guidance for the full year to $93 billion from a prior forecast of as much as $94.5 billion. The company also restarted a share buyback program targeting around $1 billion annually.

“Today’s weaker-than-expected results will not leave investors with a feeling of confidence in the outlook,” Barclays analyst Brandon Oglenski said in a research note.

The results come a day after UPS announced the acquisition of Mexican parcel carrier Estafeta. UPS has pointed to international expansion, especially in the nearshoring destination of Mexico, as a top growth priority for the company.