Package-delivery giant books a near $900 million charge for severance costs, but stock rallies after an earnings beat and raised outlook
UPS's stock rallies after reporting an earnings beat and raised outlook.
Shares of United Parcel Service saw a nice bump in early Tuesday trading after the package-delivery giant beat earnings and second-quarter sales expectations by a wide margin, while lifting its profit outlook as the network reconfiguration paid off.
CEO Carol Tomé said the quarterly results marked "an expected and significant shift" in the company's (UPS) performance, as the "glide down" of the Amazon (AMZN) business, which was launched 18 months ago, and the early-retirement program started last year were completed during the quarter.
The stock rose 1.8% in premarket trading.
Net income dropped 51.4% from a year ago to $604 million, but that decline included an $891 million charge mostly for severance costs stemming from the Driver Choice Program. That program included $150,000 payments to up to 7,500 drivers who chose to retire early.
Excluding that charge, adjusted earnings per share rose to $1.76 from $1.55 and beat the average analyst estimate compiled by FactSet of $1.66.
Revenue grew 7.6% to $22.83 billion, above the FactSet consensus of $21.86 billion. The margin of that top-line beat was the widest in more than five years, based on available FactSet data back to July 2021.
Domestic package revenue increased 6% to $14.93 billion, boosted by a 9.3% rise in revenue per package. International revenue jumped 12.5% to $5.04 billion, as revenue per piece climbed 18.9%.
Looking ahead, the company raised its 2026 EPS outlook to about $7.22, from guidance of $7.16 provided in January. The company expects full-year revenue of $91.2 billion, up from previous guidance of $89.7 billion.
UPS's stock has gained 13.9% in 2026 through Monday. While that outpaced the S&P 500 index's SPX 8.3% rise this year, it trailed the 33.6% rally in shares of rival FedEx $(FDX)$.
-Tomi Kilgore
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