United Parcel Service (NYSE:UPS) surpassed Wall Street estimates for quarterly profit and raised its full-year adjusted operating margin forecast on Thursday after it hived off its volatile truckload brokerage business, Coyote Logistics.
UPS is seeing year-on-year volume growth in the U.S. in the second half of the year, following nine quarters of weak demand since the end of the early pandemic e-commerce surge in late 2021.
However, the bulk of the growth ahead of the peak holiday season has been driven by new e-commerce entrants, identified by industry experts and shoppers as China-linked bargain retailers Shein and Temu.
This has exacerbated the shift from premium air services to less expensive ground services and then to the even more low-profit SurePost services, where UPS picks up packages and hands about 60% of them off to the U.S. Postal Service for final delivery.
The company had slashed its full-year adjusted operating margin target to 9.4% in July, despite an uptick in U.S. volumes because of the shift. It now expects a full-year operating margin of 9.6%.
UPS saw a 6.5% growth in average daily volumes in its domestic segment in the third quarter. Its adjusted operating margin of 8.9% was above last year’s 7.7%, on cost cuts.
Shares of the company, seen as a bellwether for the global economy, were up $13.10, or 9.9%, in early Thursday trading to $144.35.
