UPS has reported strong quarterly performance, surpassing profit expectations and raising its full-year adjusted operating margin forecast. The company's shares rose over 5% in premarket trading, reflecting investor confidence in its strategic adjustments and market positioning. This positive momentum follows UPS's divestment of its truckload brokerage business, Coyote Logistics, which had previously caused volatility in its operations.
In the latter half of the year, UPS experienced significant year-on-year volume growth in the U.S. after nine consecutive quarters of subdued demand. This growth can be attributed to the influx of new e-commerce players, particularly China-linked retailers such as Shein and Temu, which have shifted consumer preferences towards more affordable options. As a result, UPS has transitioned from premium air services to more economical ground services and low-margin SurePost services, collaborating with the U.S. Postal Service for final deliveries.
Despite changing consumer behaviors, UPS has improved its adjusted operating margin, which rose to 8.9% in the third quarter. This increase is due to effective cost-cutting measures. The company has revised its full-year adjusted operating margin target upward to 9.6%, signaling a more optimistic outlook for the peak holiday season.
UPS reported an adjusted profit per share of $1.76, surpassing last year's figure of $1.57 and exceeding analysts' average estimate of $1.63. Additionally, UPS's consolidated revenue reached $22.25 billion, above the anticipated $22.14 billion. This financial performance highlights UPS's resilience and adaptability in a rapidly changing logistics landscape.
UPS has expanded its operational capabilities by integrating the air cargo business of the United States Postal Service (USPS) following the expiration of FedEx's contract. This strategic partnership is expected to be profitable in its first year, enhancing UPS's service offerings and operational efficiency. The integration of USPS's air cargo operations is anticipated to strengthen UPS's position in the competitive logistics market.
As the holiday season approaches, UPS is well-positioned to capitalize on the expected surge in e-commerce activity. The company's ability to adapt to shifting consumer preferences and focus on cost management will be crucial in navigating the complexities of the logistics sector. UPS's strategic initiatives and partnerships will play a pivotal role in sustaining its growth trajectory and maintaining its status as a bellwether for the global economy.