UPS raises annual forecasts as higher-margin parcels drive quarterly profit beat
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United Parcel Service's (UPS) newly launched electric delivery truck is seen in Compton, California, U.S., September 13, 2023. REUTERS/Lisa Baertlein
Oct 27 (Reuters) - United Parcel Service raised its annual revenue and profit forecasts on Tuesday after beating quarterly earnings estimates, helped by higher-margin international air shipments and a reduction in lower-margin deliveries for Amazon.com.
The world's largest parcel delivery company, widely viewed as an early indicator of global economic activity, said it was on track to meet its target of $3 billion in cost savings this year.
The company has been shutting down several facilities and cutting thousands of jobs as it scales back doorstep deliveries of millions of packages for Amazon, its largest customer.
Rival FedEx, which reports results on Wednesday, is using a similar playbook. Both companies are under pressure from investors to show progress toward improving margins by focusing on higher-value shipments.
UPS appears to be gaining from those efforts. Quarterly adjusted operating margins for the US Domestic Package unit, which generates 60% of UPS' revenue, rose to 7% from 6.4% earlier.
The smaller but more profitable International Package division also reported a higher adjusted operating margin of 14.9% for the third quarter, compared with 14.8% last year.
Shares of UPS climbed 1.2% in premarket trading, while FedEx's stock was up 0.8%.
The Atlanta-based delivery giant now expects 2026 adjusted profit of around $7.28 per share, compared with $7.22 it had forecast in July. Analysts expect the company to report a profit of $7.19 per share, according to data compiled by LSEG.
The company expects annual revenue of $92.6 billion, compared with its previous projection of $91.2 billion and above analysts' estimate of $91.73 billion.
For the third quarter, UPS posted an adjusted profit of $1.69 per share, lower than $1.74 per share last year but above analysts' expectation of $1.63.
(Reporting by Lisa Baertlein and Nandan Mandayam; Editing by Leroy Leo)
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