UPS Q3: fewer parcels, higher prices, a forwarding write-down
UPS charges 15% more per international parcel and raises its outlook. UPS’s international revenue per parcel rose 15.0% in the third quarter, and revenue rose 6.7% to $22.9bn. It raised its 2026 outlook to about $92.6bn. Our view: UPS is happy to carry less and charge more, and it expects shippers to accept that. Its US daily volume fell to about 15.6m parcels from 16.2m. It also wrote down $182m of goodwill in the unit that holds its forwarding business. Forwarders should expect no price relief through peak. Our call: UPS’s Q4 results, due late January, will show international revenue per piece up at least 10% again.
UPS is shipping fewer parcels and charging far more for each one
UPS’s international business earned 15.0% more per parcel in the third quarter than a year earlier. It did this while carrying fewer parcels. The company reported results on Tuesday 27 October. Revenue was $22.9bn, up 6.7%, and grew in all three of its segments. It raised its full-year 2026 outlook to about $92.6bn revenue, about $8.75bn adjusted operating profit and about $7.28 adjusted EPS (earnings per share, excluding one-off items).
Our view is simple. UPS has decided it would rather move fewer parcels at higher prices. It is now confident enough to raise guidance on that basis just before peak. For forwarders and shippers, the message is to plan for firm parcel and express pricing through the holidays and into 2027. The one weak spot is in the unit that holds UPS’s own forwarding business. It is growing fast, but it has just taken a write-down.
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The numbers behind the price-over-volume story
Start with the US, which is UPS’s largest business. According to the company’s release, US Domestic revenue rose 4.5% to $14.9bn. Average daily volume fell to about 15.6m parcels from about 16.2m a year earlier. Revenue per parcel rose 6.1%. Adjusted operating margin was 7.0%. So fewer parcels went through the network, but each one earned more.
Part of that is fuel. On the earnings call, CFO Brian Dykes said about half of the 6.1% rise in US revenue per piece came from fuel surcharge rates. He also said: “Our fuel surcharges helped offset higher fuel expense in the quarter and preserve operating profit.” In other words, UPS is passing much of its higher fuel cost on to customers rather than absorbing it.
The international business shows the pattern more clearly. Revenue rose 7.1% to $5.0bn. Revenue per piece rose 15.0%. The operating margin was 14.9%, the highest of the three segments. Dykes said on the call that total international daily volume fell 8.7%, mainly because of geopolitical tensions. He said the year-on-year decline narrowed each month of the quarter. US inbound volume returned to growth in September. Asia-to-Asia export volume rose 8.4%, its third quarter of growth in a row.
Tomé tied part of the earlier international slump to trade rules. “When the de minimis exemption was eliminated in Europe, the volume had a sharp decline,” she said on the call. De minimis is the threshold below which low-value parcels enter a country without duty. Removing it hit small e-commerce parcels hardest.
Group adjusted EPS was $1.69, down from $1.74 a year earlier. Reported (GAAP) EPS was $1.37. Quartz described the quarter as beating expectations. Adjusted operating profit was $2.1bn, a 9.0% margin.
The forwarding unit grew 18% and still took a write-down
Supply Chain Solutions (SCS) is the segment that holds UPS’s freight forwarding, customs brokerage and contract logistics. Its revenue rose 18.2% to $3.0bn. The release says this was “primarily due to growth in forwarding and logistics, including healthcare.” On the call, UPS said forwarding revenue rose 17.5%, driven by higher international air and ocean freight rates. Logistics revenue rose 17.2%, led by healthcare.
Yet the same unit took “a $182 million charge associated with a goodwill impairment in Supply Chain Solutions,” according to the release. Goodwill is the amount a company paid for acquisitions above the book value of what it bought. An impairment means the company now thinks part of that premium is worth less than it said. UPS did not give a reason in the release. That charge pulled the unit’s reported operating margin down to 3.1%. Excluding it and other items, the adjusted margin was 9.2%.
Our reading is that SCS’s growth is being carried by freight rates, not by a business that is earning what UPS expected when it bought into it. Rates can turn. When air and ocean rates fall, revenue that grew because of them falls too. The write-down suggests UPS’s own accountants see less long-term value in the unit than its headline growth implies. That is our interpretation, not something UPS said.
The total net charge from one-off items was $279m, or $0.32 a share. Besides the impairment, it included $130m of after-tax transformation costs and a $33m gain on selling MD-11 assets.
The cost-cutting continues, with fewer details
UPS is in the middle of two cost programmes. Network Reconfiguration closes and merges facilities. Efficiency Reimagined redesigns processes. The release says that in the first nine months of 2026 UPS “reduced our operational workforce” and “closed certain daily operations at leased and owned buildings.” It gives no counts. It expects $1.4bn to $1.6bn of transformation costs this year. It says the programmes delivered about $1.8bn of benefits in the first nine months, with nearly $3bn expected for the full year. Efficiency Reimagined is expected to end in Q4 2027.
The release also says the planned cut in volume from UPS’s largest customer was completed in Q2 2026. On the call, management tied the lower US volume to this planned reduction in Amazon volume. That matters for the comparisons. Dykes said total daily volume should be down about 1.3% in Q4, as UPS laps the Amazon reduction.
A year ago the story was sharper. In October 2025, FXStreet reported that UPS’s adjusted EPS of $1.74 beat estimates of $1.30. Revenue fell 4% to $21.4bn. The shares jumped about 13% in early trading. That report also said UPS had cut 48,000 jobs and shut 93 buildings in the first three quarters of 2025. This year’s release gives no such totals. The surprise has also faded. This quarter’s EPS was below last year’s, and the raise to guidance is the headline.
What peak and 2027 pricing look like from here
UPS’s Q4 guidance is about $25.7bn revenue and about $3.3bn adjusted operating profit. By our calculation that is a margin of roughly 12.8%, well above Q3’s 9.0%. Tomé said on the call: “we expect average daily volume to increase approximately 25% from the third quarter to the fourth quarter.” Management said that is similar to last year. They also said nearly 70% of peak packages should flow through automated processes.
So UPS expects a normal-sized peak, with fewer parcels than last year and higher yields on each. That points to pricing staying firm, not softening, through November and December.
On 2027, Dykes said: “We announced our GRI earlier this week, that’s consistent with prior years.” A GRI is a general rate increase, the headline list-price rise carriers apply each year. He did not give the figure on the call. For a benchmark, Supply Chain Dive reported that FedEx will raise US package rates by an average of 5.9% from 4 January 2027. FedEx is also raising surcharges. For example, its residential delivery surcharge goes from $6.95 to $7.35. Last year, UPS matched FedEx’s 5.9% headline increase for 2026, according to Parcel Industry. Dykes also said he expects a 200 to 300 basis point (2 to 3 percentage point) benefit from base rates and mix to continue.
What this means for forwarders
First, do not expect parcel or express pricing to ease through peak. UPS is earning more per piece and has told investors it expects that to continue. Shippers who send small international consignments through integrators should budget for higher costs, not lower ones.
Second, the rise in international yield is the parcel side of what forwarders see in air freight. There are fewer shipments, at higher prices, with geopolitics and trade rules behind both. UPS’s own forwarding revenue grew on higher air and ocean rates. That tells you rates, not demand, are doing the work.
Third, the SCS write-down is a reminder that integrators’ forwarding arms are not their priority. UPS’s profit comes from parcels. Its forwarding unit is growing, but its margin was 3.1% on a reported basis. Independent forwarders competing with UPS for freight should not assume it will chase volume with price. Its focus is yield.
Fourth, the recovery in US inbound and Asia-to-Asia parcel volume is worth watching. If inbound US volume keeps growing, as it did in September, transpacific e-commerce air demand could pick up into early 2027.
Our prediction
These are our calls, not company guidance.
When UPS reports fourth-quarter results in late January 2027, international revenue per piece will again be up at least 10% year on year. International daily volume will still be lower than a year earlier.
We also expect UPS’s 2027 GRI, once its published rate tables are compared, to average at least 5.9% on US package rates. That would match FedEx. We also expect it to come with some surcharge increases larger than the headline rate, as FedEx’s did, before the increase takes effect around the turn of the year.
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