United Parcel Service (UPS) reported third-quarter earnings that easily surpassed Wall Street expectations, while also detailing its transformation efforts, including cutting approximately 34,000 jobs.
Due to its strong performance, the company’s stock price surged over 12% before Tuesday’s opening (October 28).
In the three months ending on September 30, UPS posted a net profit of $1.31 billion, or $1.55 per share. A year ago, the company had a profit of $1.99 billion, or $1.80 per share.
Although net profit declined year-over-year, the adjusted data remained strong. This year, excluding one-time costs, the adjusted earnings per share were $1.74, comfortably exceeding the Zacks Investment Research analyst’s expectation of $1.31 per share.
Total revenue stood at $21.42 billion, surpassing Wall Street’s estimate of $20.84 billion.
Many analysts view this as a clear signal that CEO Carol Tome’s “revitalization efforts are making progress,” which could help reverse the stock’s poor performance of the past few years.
As part of its transformation plan, UPS implemented two significant measures in the first nine months of this year.
Massive Job Cuts:
The company has cut around 34,000 jobs, a 70% increase from the initial target of 20,000. These layoffs primarily affected operational staff, including drivers and package handlers.
Facility Closures:
Simultaneously, UPS has shut down the daily operations of 93 leased and owned buildings. The company stated that it is still seeking to identify additional locations to close.
The core motive behind the company’s transformation is to significantly reduce the handling of Amazon’s freight volume.
As early as January of this year, UPS announced an agreement with its largest customer, Amazon, aiming to reduce its freight volume by over 50% by the second half of 2026.
CEO Tome stated during a January earnings conference call that after nearly 30 years of cooperation with Amazon, UPS decided to reassess this relationship upon contract expiration and focus on higher-profit business segments.
As of September 30, UPS has achieved approximately $2.2 billion in cost savings. The company anticipates a total of $3.5 billion in year-over-year cost savings by 2025.
UPS expects fourth-quarter revenue to be around $24 billion, slightly exceeding market expectations.