Bank of America: UPS raises full-year guidance: Small-business parcel growth, but Amazon volume cuts still weigh on operations

How much did full-year targets rise after the third-quarter beat?

UPS reported third-quarter adjusted earnings per share of $1.69, up 17% year over year and above Bank of America's forecast of $1.65 and the market estimate of $1.63. Adjusted operating profit was $2.05 billion, $34 million above Bank of America's forecast; outperformance in the international and US domestic businesses partly offset a shortfall in the supply chain business.
UPS raised its 2026 revenue target from approximately $91.2 billion to $92.6 billion, its adjusted operating profit target from approximately $8.65 billion to $8.75 billion, and its earnings per share target from approximately $7.22 to $7.28.
Gains from asset sales helped third-quarter results, but the company expects lease cancellation costs and accelerated equipment depreciation to offset their impact, leaving a small net effect from asset sale gains on full-year results.

Average daily US domestic parcel volume fell 3.3% year over year in the third quarter, a smaller decline than the 6.8% expected by Bank of America. Excluding Amazon, US core volume grew 2% year over year; the company expects that growth rate to continue, while Amazon-related volume pressure will persist through the first half of 2027.
Average daily parcel volume from small and medium-sized businesses rose 3.7% year over year, accounting for 35.1% of US volume, up from 34.5% in the second quarter. Meanwhile, business-to-business parcel volume continued to decline year over year, and the company said about six-tenths of that decline was related to Amazon.
US domestic revenue per piece rose 6.1% year over year, with about half coming from base pricing and an improved customer mix and the remaining approximately 3 percentage points from higher fuel rates. Revenue per piece grew 0.6 percentage points faster than cost per piece, and the domestic adjusted operating margin consequently rose 0.6 percentage points year over year to 7.0%.

International revenue rose 7% year over year to $5 billion in the third quarter, but average daily parcel volume fell 8.7%, a larger decline than the 6.8% expected by Bank of America. Revenue per piece rose 15.1%, with about half of the increase coming from fuel surcharges; the surcharges helped offset higher fuel expenses.
The international adjusted operating margin was 14.9%, 1.4 percentage points above Bank of America's forecast; operating profit rose 8% year over year, returning to year-over-year growth for the first time in six quarters.
Supply chain revenue rose 18% year over year to $2.98 billion, above Bank of America's forecast, but the adjusted operating margin was 9.2%, 1.7 percentage points below its forecast. Freight forwarding was supported by higher international air and ocean freight rates, while healthcare logistics also contributed to logistics revenue growth.

UPS expects average daily US parcel volume in the fourth quarter to rise approximately 25% from the third quarter, consistent with normal peak-season trends, but still to be slightly below the prior-year period as Amazon business continues to shrink. The company is targeting a domestic operating margin slightly below 10.5%, supported by the peak season, pricing and network efficiency.
UPS believes a lower share of Amazon business will reduce the need for additional aircraft, trailers and seasonal staff during the peak season. The company maintains its target for revenue per piece growth to exceed cost per piece growth by 0.5 to 1 percentage points and expects margins to improve by approximately 0.5 to 1 percentage points annually over the next several years.
Bank of America raised its 2026 and 2027 earnings per share forecasts from $7.10 and $8.00 to $7.28 and $8.15, respectively, and raised its price target from $108 to $114, while maintaining a neutral rating. The new target uses a price-to-earnings multiple of 14 times forecast 2027 earnings per share, up from 13.5 times previously.