UPS Forecasts Softer Peak Despite Strongest Volume Growth Since 2021
After more than two years of industrywide sluggish freight demand, UPS is finally seeing an uptick in packages flowing into its logistics ecosystem.
The Atlanta-based parcel delivery firm grew average daily U.S. volume 6.5 percent in its third quarter, marking a return to revenue growth that surpassed Wall Street estimates.
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The volume numbers built on the positive momentum since May, when UPS returned to positive growth for the first time since the 2021 fourth quarter. According to CEO Carol Tomé, this was the highest year-over-year average daily volume growth rate since the first quarter of 2021.
Consolidated revenues at UPS increased 5.6 percent to $22.2 billion during the third quarter, on net income of 4.1 billion. Across both domestic and international, package volume increased 5.4 percent to 21.5 million packages moved per day. Wall Street was fond of the results, with stock rising more than 6 percent in morning trading.
The company trimmed its revenue guidance again, this time cutting it from $93 billion to $91.1 billion. But it adjusted operating margin expectations back up to approximately 9.6 percent, from the prior 9.4 percent. UPS cut both guidance metrics when upon reporting second quarter earnings in late July—which prompted a shareholder lawsuit earlier this month on allegations that the company misled investors on anticipated financial performance.
Chief financial officer Brian Dykes identified a softer peak volume forecast from UPS customers as one of three factors reflecting the new outlook, including a “focus on revenue quality” and the $1.03 billion sale of freight brokerage Coyote Logistics to RXO.
Tomé said in the call that UPS received its last holiday forecast from shipper clients on Oct. 2, calling the predictions “tempered.” She noted that feedback has come from over 100 customers who represent 60 percent of network volume, but 85 percent of the peak surcharge.
Volume is now expected to uptick at about 3 percent, Tomé said, cited external forecasts, rather than the 5 percent anticipated earlier in the year.
The CEO attributed the tempered forecast to a shorter peak of 17 shipping days between Black Friday and Christmas Eve, saying “we haven’t seen such a compressed peak since 2019.”
“Because of the tightness of the shipping season, many customers will go into a store to complete their holiday purchases,” Tomé said during the call. “It will still be a good peak, but just not as dynamic as people thought at the beginning of the year. Whatever happens, we’re prepared to handle the volume.”