Updated Version 6 - Resend - UPS CEO says the company will still earn more profit despite a slight decrease in delivery volume during the holiday season

Paragraphs 8 and 9 include additional comments from the CEO

Nandan Mandayam/Lisa Baertlein

Reuters, October 27 - United Parcel Service (UPS, UPS.N) raised its annual revenue and profit outlook on Tuesday, after reporting better-than-expected third-quarter results following cuts to millions of unprofitable Amazon package deliveries.

CEO Carol Tome said UPS is focusing on more profitable business, meaning the company can earn more profit even if package volumes drop slightly during the critical annual peak holiday quarter.

Shares of the world’s largest package delivery company surged nearly 3% in early trading.

Atlanta-based UPS expects its total average daily volume to fall 1.3% in the fourth quarter as it becomes more selective in its package deliveries. Meanwhile, executives forecast domestic revenue, the company's largest segment, will grow about 3%, while international revenue is expected to rise 7%.

“We are breaking the old paradigm that 'all packages are equal’ and ‘volume solves all problems,’” Tome told Reuters.

Chief Financial Officer Brian Dykes said the widening gap between cost per package and revenue per package will help boost margins.

Dykes noted that by cutting unprofitable deliveries in the fourth quarter—and thereby reducing overall volume—UPS is able to lower expenses for labor as well as for leasing trucks and planes during the holiday package surge.

Tome said that despite pressures from rising inflation and higher gasoline prices, U.S. consumers continue to spend, leaving holiday delivery demand prospects strong.

“U.S. consumers continue to show resilience,” she said.

Streamlined operations lay the foundation for growth

After downsizing its delivery business for its largest customer, Amazon (AMZN.O), UPS has closed some facilities and cut thousands of jobs. UPS said it completed the reduction of its Amazon-related business in the second quarter.

Rival FedEx (FDX.N) will report results on Wednesday and is taking a similar approach. Both companies face investor pressure to boost margins by focusing on high-value freight.

Tome added that data center construction is a major opportunity, since it involves multiple UPS business segments—UPS can airfreight critical components like microprocessors, arrange for sea transportation of equipment, provide warehousing, and handle final delivery.

For the third quarter, UPS reported adjusted earnings per share of $1.69, down from $1.74 a year earlier but above the analyst consensus of $1.63.

The domestic segment, which accounts for about 65% of the company's total revenue, posted an adjusted operating profit margin of 7% in the third quarter, up from 6.4% a year earlier.

The smaller but more profitable international package division also reported an adjusted operating profit margin increase to 14.9% in the third quarter from 14.8% last year.

Jefferies analysts said the third-quarter results demonstrate "strong execution," while Evercore ISI analyst Jonathan Chappell wrote in a research note that the performance offers "some confidence in the sustainability of results."

UPS also said it is on track to achieve its $3 billion cost savings target this year. As of September, $1.8 billion had already been saved.

The company now expects adjusted earnings per share for 2026 to be about $7.28, up from its July forecast of $7.22. According to data compiled by the London Stock Exchange Group (LSEG), analysts expect the company to deliver earnings of $7.19 per share.

UPS expects full-year revenue of $92.6 billion, up from the previous forecast of $91.2 billion and above the analyst consensus of $91.73 billion.

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