United Parcel Service delivered a quarter that looked good on paper - and then immediately poured cold water on the next one.
The delivery giant reported adjusted earnings per share (profit per share of stock after stripping out one-time items) of $1.76 for the three months ending in June. That beat the $1.66 analyst consensus. Revenue reached $22.8 billion, also topping Wall Street's $21.81 billion forecast.
But the headline numbers hide a mixed story. Net income actually fell sharply: $604 million this quarter versus $1.28 billion a year earlier. That drop comes mainly because of costs tied to the company's long-term restructuring, including a driver buyout program and a deliberate decision to cut ties with lower-quality volume from Amazon.
CEO Carol Tomé told investors the company is through the hardest part of that overhaul. "We launched a major transformation of our company that was transformative and came with some bumps, but we're through those bumps," she said.
The company has been intentionally reducing the amount of packages it handles for Amazon. To date, the company has cut out roughly 2 million daily packages from its Amazon business, referring to this as "lower-quality volume," and has shed about $4.5 billion in associated costs.
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That process is not done yet. UPS expects domestic average daily volume to decline by mid-single digits in the third quarter, partly because of seasonal trends but mostly because it keeps cutting Amazon volume. The company also warned that domestic revenue for the third quarter would be flat.
Tomé made a point of saying that if you ignore Amazon, the rest of the business actually grew. "If you ignore Amazon and the volume that we intentionally made available to the market, we actually grew our volume in the second quarter."
The stock dropped about 4% on the news, even though the quarter itself looked strong.
UPS's turnaround plan includes a network reconfiguration program that has already delivered roughly $1.2 billion in program benefits.
Healthcare logistics is a key part of that future. UPS's cold chain logistics network now spans more than 20 million square feet across more than 36 countries. Healthcare revenue generated more than $3 billion for the second straight quarter.
Tomé called UPS the only carrier with end-to-end healthcare solutions using its own assets. "Amazon's not offering that," she said.
The company is also pushing automation and new tracking technology. Tomé described the network as "leaner, more automated, more agile" and said it will deliver operating leverage as volume grows. UPS is pouring resources into RFID technology and AI to improve package tracking, a move Tomé described as "the most significant package visibility advancement in a decade."
According to Tomé, UPS has experienced "momentum" on its China‑to‑U.S. shipping route, where volumes have been growing compared to a year earlier since May. "As we enter the second half of the year, we've got momentum, even in the face of external factors that could influence our results, like war and fuel price volatility," she said.
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