UPS reports earnings growth for the first time in almost two years

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UPS Inc. returned to sales and profit growth for the first time in almost two years as the company benefited from higher volumes, more profitable shipments and consistent labor costs.

The company highlighted a 6.5% increase in average daily U.S. parcel volume, price increases and additional air cargo volume from the U.S. Postal Service.

The company’s shares rose 8.6% in pre-market trading in New York. Its shares are down 16% this year as of the close of business on Oct. 23, compared with a 22% gain in the S&P 500 Index.

Adjusted earnings for the third quarter were $1.76 per share, the company said in an Oct. 24 statement. Analysts on average predicted $1.63 per share, according to Bloomberg estimates. Revenue for the period was in line with analyst expectations of $22.2 billion.

“After a difficult 18 months, our company has returned to revenue and profit growth,” said Carol Tomé, CEO of UPS.

The company lowered its consolidated revenue forecast to $91.1 billion from $93 billion, which had already been cut last quarter from a whopping $94.5 billion. UPS said it also completed the sale of Coyote Logistics to RXO this quarter.

The earnings report marks the first period of year-over-year growth in adjusted earnings per share after six quarters of declines. The parcel industry has been under pressure from weak demand for transportation services since falling from pandemic highs. Meanwhile, inflation-weary customers are switching to cheaper shipping options, cutting into carriers’ profits.

Volume

As of 2021, UPS has seen a decline in demand for next-day air shipments each year. Meanwhile, low-margin shipments like those from e-commerce sites Shein and Temu are flooding the carrier’s network and using the more economical SurePost option. Average daily next-day U.S. flight volume was down 5% from a year earlier.

Shares of rival FedEx Corp. rose 2.9% in early trading following the UPS earnings release, reflecting investor optimism that demand is finally starting to improve ahead of the holiday season.

This quarter, UPS was relieved of high upfront labor costs associated with the first year of its Teamsters contract, which celebrated its anniversary in August. It also expanded its air cargo network thanks to a new agreement with the U.S. Postal Service that went into effect on September 30.

To cut costs, the company in January unveiled a plan to save $1 billion by eliminating 12,000 management positions.

UPS ranks No. 1 and FedEx No. 2 on the Top 100 Transportation Topics list of the largest for-hire carriers in North America.

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