United Parcel Service (UPS) Surpasses Quarterly Estimates

(Reuters) – United Parcel Service exceeded Wall Street's expectations for quarterly profit and raised its full-year adjusted operating margin forecast on Thursday, after shedding its volatile truckload brokerage business, Coyote Logistics.

Shares of the company, viewed as a barometer for the global economy, rose over 5% in premarket trading.

UPS is experiencing year-on-year volume growth in the U.S. during the second half of the year, following nine quarters of weak demand since the end of the early pandemic e-commerce surge in late 2021.

However, much of the growth ahead of the peak holiday season has been fueled by new e-commerce entrants, identified by industry experts and shoppers as China-linked bargain retailers Shein and Temu.

This has intensified the shift from premium air services to cheaper ground services and to the even lower-profit SurePost services, where UPS collects packages and hands off about 60% to the U.S. Postal Service for final delivery.

The company had reduced its full-year adjusted operating margin target to 9.4% in July, despite a rise in U.S. volumes due to the shift. It now anticipates a full-year operating margin of 9.6%.

UPS reported a 6.5% growth in average daily volumes in its domestic segment in the third quarter. Its adjusted operating margin of 8.9% surpassed last year's 7.7%, aided by cost reductions.

The parcel delivery firm announced an adjusted profit per share of $1.76, up from last year's $1.57 per share and above analysts' average estimate of $1.63 per share.

Consolidated revenue of $22.25 billion also exceeded analysts' average estimate of $22.14 billion.

UPS has begun onboarding the United States Postal Service air cargo business, which it acquired from rival FedEx after its contract expired on September 29. UPS expects the five-year USPS contract to be profitable in its first year.