(Bloomberg) -- United Parcel Service Inc. returned to sales and profit growth for the first time in almost two years as the company benefited from higher volumes, more profitable packages and steadying labor costs.
The company highlighted a 6.5% increase in average daily US volume and additional USPS air cargo volume as key drivers of third-quarter results. Adjusted earnings were $1.76 per share, 13 cents above analyst estimates.
“We think the strong performance in the 3Q is enough to convince investors to believe in the UPS story after over a year of missteps and distractions,” Jefferies analyst Stephanie Moore said in a research note.
UPS shares rose as much as 10% as of 9:31 a.m. in New York, their biggest intraday gain since February 2022. The stock pared its year-to-date loss to 9%, compared with a 22% increase in the S&P 500. Shares of competitor FedEx Corp. rose 3%.
Thursday’s 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 shipping demand since a fall from pandemic highs. Meanwhile, inflation-weary customers are shifting to cheaper shipping options, squeezing carriers’ profits.
UPS has seen demand for next-day air shipping fall every year since 2021. In the meantime, low-margin shipments like those from e-commerce sites Shein and Temu are flooding the carrier’s network and utilizing its more economical SurePost option. In the third quarter, average daily US next-day air volume dropped by 5% drop from a year ago.
Revenue in the third quarter came in line with analyst expectations of $22.2 billion. For the full year, UPS lowered its consolidated revenue forecast to $91.1 billion from $93 billion, which had already been dropped last quarter from as much as $94.5 billion. The revised forecast reflects the sale of Coyote Logistics to RXO in the quarter and softer expectations for the holiday season.
UPS CEO Carol Tomé said on the earnings call that “the consumer is actually in pretty good shape” ahead of the holidays, though a compressed timeline between Black Friday and Christmas Eve this year may change how people shop.
In the third quarter, UPS was relieved of hefty upfront labor costs associated with the first year of its contract with the Teamsters, which reached its anniversary in August. It also added air cargo volume to its network thanks to a new agreement with the US Postal Service.
To cut costs, the company in January revealed a plan to save $1 billion by eliminating 12,000 management jobs.
(Updates with analyst comment in third paragraph, shares in fourth.)
©2024 Bloomberg L.P.