UPS — Third Quarter 2026 Earnings Summary

Financial Performance:

• Consolidated revenue increased 6.7% year-over-year to $22.9 billion.
• GAAP consolidated operating profit was $1.7 billion; non-GAAP adjusted consolidated operating profit was $2.1 billion.
• Diluted EPS was $1.37; non-GAAP adjusted diluted EPS was $1.69.
• GAAP operating margin was 7.6%; non-GAAP adjusted operating margin was 9.0%.
• GAAP results included a net charge of $279 million ($0.32 per share), comprised of $130 million in transformation strategy costs, a $182 million goodwill impairment in Supply Chain Solutions, and a $33 million gain on the sale of MD-11 assets.
• Nine-month consolidated revenue (implied from full-year guidance and Q3) showed growth, with nine-month GAAP operating profit at $3.9 billion compared to $5.3 billion in 2025.
• Nine-month non-GAAP adjusted free cash flow was $4.22 billion, up from $2.74 billion in the prior year period.
• Nine-month GAAP net income was $2.63 billion; non-GAAP adjusted net income was $3.84 billion.

Guidance and Future Outlook:

• Raised fourth-quarter 2026 consolidated revenue guidance to approximately $25.7 billion.
• Raised fourth-quarter 2026 non-GAAP adjusted operating profit guidance to approximately $3.3 billion.
• Raised full-year 2026 consolidated revenue guidance to approximately $92.6 billion.
• Raised full-year 2026 non-GAAP adjusted operating profit guidance to approximately $8.75 billion.
• Raised full-year 2026 non-GAAP adjusted diluted EPS guidance to approximately $7.28.
• Raised full-year 2026 non-GAAP adjusted free cash flow target to approximately $6.1 billion.
• Confirmed full-year 2026 capital expenditures of approximately $3.0 billion.
• Confirmed full-year 2026 dividend payments of around $5.4 billion, subject to board approval.
• Confirmed full-year 2026 effective tax rate of approximately 23%.
• Confirmed full-year 2026 pension contributions of $1.3 billion.

Business Segments and Product Lines:

• U.S. Domestic Segment: Revenue increased 4.5% to $14.865 billion, driven by a 6.1% increase in revenue per piece. Operating margin was 6.1% (GAAP) and 7.0% (non-GAAP).
• International Segment: Revenue increased 7.1% to $5.007 billion, driven by a 15.0% increase in revenue per piece. Operating margin was 14.9% on both GAAP and non-GAAP adjusted bases.
• Supply Chain Solutions: Revenue increased 18.2% to $2.981 billion, primarily due to growth in forwarding and logistics, including healthcare. Operating margin was 3.1% (GAAP) and 9.2% (non-GAAP).
• Nine-month U.S. Domestic non-GAAP adjusted operating profit decreased 3.8% to $2.787 billion.
• Nine-month International non-GAAP adjusted operating profit decreased 5.3% to $1.920 billion.
• Nine-month Supply Chain Solutions non-GAAP adjusted operating profit decreased 8.9% to $771 million.

Market and Competitive Landscape:

• Management stated the company is entering the holiday shipping season from a position of strength with the most automated and efficient network in its history.
• The company noted growth in forwarding and logistics within Supply Chain Solutions, including healthcare.
• The press release mentions significant competition on local, regional, national, and international bases as a risk factor.

Risks and Challenges:

• GAAP results were impacted by a $182 million goodwill impairment charge in Supply Chain Solutions.
• Transformation strategy costs totaled $171 million for the quarter and $1.4 billion for the first nine months of 2026.
• The "Efficiency Reimagined" initiative is not expected to conclude until the fourth quarter of 2027.
• Risks include changes in general economic conditions, global trade policy, tariffs, geopolitical conflicts, labor strikes, cybersecurity incidents, climate change impacts, and fluctuating fuel prices.

Management Commentary and Tone:

• CEO Carol Tomé thanked employees for their commitment and highlighted "strong performance" driven by premium growth and greater network efficiency.
• Management expressed confidence in the business fundamentals, citing the strength of the network and momentum as reasons for raising full-year guidance.
• The tone is positive regarding the holiday season outlook and the execution of transformation initiatives.

Other Key Points:

• Transformation strategy initiatives (Transformation 2.0, Fit to Serve, Network Reconfiguration, Efficiency Reimagined) generated approximately $1.8 billion in program benefits in the first nine months of 2026.
• Management expects to achieve nearly $3 billion in full-year 2026 benefits from these initiatives.
• Non-GAAP adjusted operating expense is expected to exclude between $1.4 billion and $1.6 billion in costs for the full year 2026, primarily related to employee separation costs and third-party consulting fees.
• $1.2 billion of the excluded costs is related to the Driver Choice Program.
• As of September 30, 2026, the company had incurred $1.4 billion in costs during 2026 and $1.9 billion in total costs for these initiatives.
• A gain of $33 million was recognized on the sale of MD-11 assets.
• The company plans to hold a conference call with CEO Carol Tomé and CFO Brian Dykes on October 27, 2026, at 8:30 a.m. ET.