UPS Raises Full-Year Outlook After Third-Quarter Earnings Beat Forecasts

UPS raised its full-year outlook after third-quarter adjusted earnings of $1.69 a share beat forecasts, as higher-priced shipments lifted revenue across all three segments.

UPS reported the results on Tuesday, for the three months ended September 30. The Atlanta carrier runs the largest package network in the United States. It is entering the holiday shipping season, its busiest stretch of the year.

Adjusted profit beat, while reported profit fell

Adjusted earnings were $1.69 a share. Analysts had forecast $1.62 a share. Reported profit fell to $1.16 billion, or $1.37 a share. A year earlier, profit was $1.31 billion, or $1.55 a share.

Revenue climbed 6.7% to $22.9 billion. Wall Street had modeled $22.27 billion. Operating profit was $1.7 billion on a reported basis. Adjusted operating profit was $2.1 billion.

The gap between the two profit lines is one charge. Reported results include a net charge of $279 million, or $0.32 a share. It combines $130 million of after-tax transformation costs with a $182 million goodwill impairment in Supply Chain Solutions. Goodwill impairment is a write-down of an acquired business's value. A $33 million gain on the sale of MD-11 assets partly offset the charge.

Higher prices, not more packages, drove the segments

U.S. Domestic revenue rose 4.5% to $14.87 billion. Revenue per piece — the average price of each package — rose 6.1%. Operating profit was $906 million, or $1.03 billion adjusted. The margin was 6.1%, or 7.0% adjusted.

International revenue rose 7.1% to $5.01 billion. Revenue per piece rose 15.0%. Operating profit was $746 million. The margin was 14.9% on both a reported and an adjusted basis.

Supply Chain Solutions revenue rose 18.2% to $2.98 billion. UPS credited growth in forwarding and logistics, including healthcare. Operating profit fell to $92 million, from $525 million a year earlier. Adjusted operating profit was $274 million.

Chief Executive Carol Tomé credited premium growth and greater network efficiency. She said: “Our third-quarter results demonstrate the continued strengthening of our business fundamentals, driven by premium growth and greater network efficiency.” She added that UPS is entering the holiday season “with the most automated and efficient network in our history.”

The raise sets a higher bar for the holiday quarter

For the full year, UPS now expects revenue of about $92.6 billion. It previously expected about $91.2 billion. Wall Street had modeled $91.78 billion. Adjusted earnings guidance rose to about $7.28 a share, from $7.22. Analysts polled by FactSet had expected $7.19.

Adjusted operating profit guidance rose to about $8.75 billion. Adjusted free cash flow guidance rose to about $6.1 billion. For the fourth quarter alone, UPS expects revenue of about $25.7 billion. It expects adjusted operating profit of about $3.3 billion.

UPS also confirmed the rest of its full-year plan. Capital spending stays at about $3.0 billion. Dividend payments stay at around $5.4 billion, subject to board approval. The effective tax rate stays at about 23%, with $1.3 billion in pension contributions.

The beat follows a long restructuring. UPS has phased out roughly half of its lower-margin Amazon volumes. It has focused instead on higher-quality shipments. It has also cut tens of thousands of delivery-driver and warehouse-worker roles.

Shares ticked up 1.7% in premarket trading. The reaction was measured for a beat-and-raise quarter. It suggests investors want holiday-quarter delivery before paying more for the story.

What remains unknown

What remains unknown is whether the holiday quarter delivers the $25.7 billion of revenue UPS now expects. Also unknown is whether domestic pricing gains hold as volumes rebuild. What to watch is the fourth-quarter result against the new guide, the domestic margin path, and whether Supply Chain Solutions profit recovers from $92 million. The verified record is clear on the quarter itself: pricing, not volume, carried the beat, and management raised the year on that strength.