Updated version 4 - Reissue - UPS raises annual performance outlook, high-margin package business drives quarterly profits above expectations

Details on cost savings and Amazon downsizing were added in paragraphs 2-3, broker commentary was added in paragraph 7, and share price movement was updated in paragraph 8.

Nandan Mandayam/Lisa Baertlein

Reuters, October 27 - United Parcel Service (UPS.N) on Tuesday raised its annual revenue and profit forecasts after quarterly results beat market expectations, driven by high-margin international air freight business , and the company’s decision to cut millions of unprofitable last-mile deliveries for Amazon.

Widely seen as a bellwether for global economic activity, the world’s largest package delivery company said it is on track to meet its $3 billion cost savings target this year. By September, the company had already saved $1.8 billion.

As the company scaled back millions of last-mile deliveries for its largest customer Amazon (AMZN.O), UPS has closed multiple facilities and cut thousands of jobs. UPS said the reduction in Amazon-related operations was completed in the second quarter.

Rival FedEx (FDX.N) will report earnings on Wednesday and has taken a similar strategy. Both companies face investor pressure to show margin gains by focusing on high-value freight.

UPS appears to be benefiting from these measures. The U.S. domestic package unit, accounting for 60% of UPS revenue, saw its quarterly adjusted operating margin rise to 7% from 6.4% previously.

The smaller but more profitable international package division also reported an adjusted operating margin of 14.9% for the third quarter, up from 14.8% last year.

Jefferies analysts noted the quarterly report reflected “strong execution this quarter,” while Jonathan Chappell at Evercore ISI wrote in a research report that these results give “some confidence in the sustainability” of the performance.

UPS shares rose 1.3% in premarket trading, while FedEx shares were flat.

The Atlanta-based delivery giant now expects adjusted earnings per share to be about $7.28 in 2026, up from its July forecast of $7.22. According to data compiled by LSEG, analysts had forecast $7.19 per share.

The company now expects full-year revenue of $92.6 billion, up from its previous forecast of $91.2 billion and above analysts’ estimates of $91.73 billion.

In the third quarter, UPS posted adjusted earnings per share of $1.69, down from $1.74 a year earlier but above analysts’ forecast of $1.63.

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