Ups's Stock Surges as Revenue Beats Forecasts for the First Time in Two Years

Shares of United Parcel Service Inc. (UPS) surged in early Thursday trading, reaching their highest level in three months, following a strong third-quarter earnings report that exceeded revenue expectations for the first time in two years. This performance was driven by growth in the company's U.S. business.

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Although UPS slightly lowered its full-year revenue forecast, this adjustment was primarily due to the completion of its sale of Coyote Logistics, rather than operational issues.

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Carol Tomé, Chief Executive Officer of UPS, noted the company’s return to growth after an 18-month stretch of challenges. “After a challenging 18-month period, our company returned to revenue and profit growth,” Tomé said. With the holiday season approaching, she expressed confidence in the company's ability to deliver another successful peak season, pointing to the positive momentum from the third quarter.

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The stock surged 6.1% in premarket trading on Thursday, positioning it to open at its highest price since July 22. If these gains hold, UPS would achieve its largest one-day post-earnings jump since February 1, 2022, when the stock soared 14.1%.

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In terms of financial performance, net income for UPS rose to $1.54 billion, or $1.80 per share, up from $1.13 billion, or $1.31 per share, during the same period last year. Excluding one-time items, adjusted earnings per share came in at $1.76, surpassing the FactSet consensus estimate of $1.63.

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UPS's revenue also saw a 5.6% increase, reaching $22.25 billion, above the $22.10 billion expected by analysts. This marked a significant turnaround for the company, as it broke an eight-quarter streak of missing revenue expectations.

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The company’s largest segment, U.S. domestic package services, experienced notable growth. Revenue for this segment rose 5.8% to $14.45 billion, beating the consensus estimate of $14.27 billion. Average daily volume for domestic packages increased by 6.5%, with 18.4 million pieces being processed daily. Ground deliveries, in particular, surged by 8.9%, helping to offset declines in other delivery services. Specifically, Next Day Air deliveries dropped by 4.9%, and deferred deliveries saw an 8.3% decline. Despite these decreases, the overall strength in the ground delivery business helped boost domestic revenue.

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UPS's international package division also contributed to the strong quarterly performance. Revenue in this segment grew 3.4% to $4.41 billion, narrowly beating the FactSet consensus of $4.40 billion. Although international package volume declined slightly by 0.6%, the company was able to offset this through an increase in revenue per package, which grew by 2.5% to $20.78 per piece.

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The supply chain solutions segment, which includes logistics and freight forwarding services, also performed well, growing its revenue by 8% to $3.38 billion. However, this came just shy of the $3.39 billion that analysts had forecast.

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Looking forward, UPS made a slight adjustment to its full-year revenue forecast, reducing it to $91.1 billion from the previous estimate of $93 billion. This reduction was due to the exclusion of revenue from Coyote Logistics, following the completion of its sale in the third quarter. The sale of Coyote Logistics was part of UPS’s broader strategy to focus on its core package delivery and supply chain businesses.

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While the company's stock has dropped 16.4% year to date through Wednesday, its strong third-quarter results are seen as a positive sign for the future. In comparison, the Dow Jones Transportation Average (DJT) has edged up by 1.2% over the same period, while the S&P 500 index (SPX) has advanced by 21.5%.

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In summary, UPS’s third-quarter earnings report provided a much-needed boost for the company after a difficult 18-month period. The combination of revenue and profit growth, strong U.S. domestic performance, and resilience in international operations has reassured investors that UPS is well-positioned for the upcoming holiday season. Although the company slightly lowered its revenue forecast due to the sale of Coyote Logistics, its core operations remain solid. With shares climbing sharply following the earnings announcement, UPS is showing signs of a rebound, potentially setting the stage for a strong finish to the year.

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