UNITED PARCEL SERVICE INC earnings calls

free cash flow and dividend safety

Q (Ari Rosa · Citi): He asked how free cash flow might change in 2027 after Driver Choice costs end, and whether dividend coverage is safe.

A: They said business performance and non-cash pension funding improved free cash flow this year. The Driver Choice cash requirement goes away, which will drive an improvement in free cash flow, though pension funding decisions could require offsetting the $450 million. Management also said the dividend is safe and secure.

"The Driver Choice cash requirement goes away, which will drive an improvement in free cash flow." — Brian Dykes (CFO)

long-term growth and earnings drivers

Q (Chris Wetherbee · Wells Fargo): He asked for the long-term growth algorithm for UPS now that major initiatives are done and what that means for earnings growth.

A: They outlined the addressable market and focus on premium segments, giving room to grow. They expect volume growth and for RPP to grow faster than cost per piece, which should produce margin expansion and drive earnings, helped by a more efficient global operating model.

"We expect our RPP to grow faster than our cost per piece so that we have margin expansion." — Carol Tomé (CEO)

margin impact of cost programs

Q (David Vernon · Bernstein): He asked how the completed cost and efficiency actions set UPS up for incremental margins going forward and for guardrails on profit outlook.

A: They said the changes are structural and durable, citing nearly 2% core volume growth and completed network and building changes that reduced hours. That structural work, plus a 50-100 basis point spread between RPP and CPP, should continue to drive margin improvement; they also highlighted RFID productivity (3 million packages today growing to 6 million next year).

"That's going to drive this structurally better margin improvement that we saw in the third quarter, and gave us the confidence to improve our fourth quarter guide." — Brian Dykes (CFO)

SMB/B2B visibility and pricing mix

Q (Tom Wadewitz · UBS): He asked how visible SMB and enterprise growth is into next year and whether base pricing plus mix will keep RPP above CPP.

A: They said they expect the enterprise and SMB growth to continue, helped by much lower churn and a resilient consumer. They also said RPP has been coming down but pricing remains constructive; they expect to continue getting a 200-300 basis point base rate pricing and mix benefit going forward.

"We expect to continue to get that kind of 200-300 basis point base rate pricing and mix benefit as we go forward." — Brian Dykes (CFO)

margin potential and path forward

Q (Scott Group · Wolfe): He asked if margins can meaningfully break out of the recent ~7.5% range and possibly reach double-digits, or if only modest yearly gains are likely.

A: They said they expect steady, year-over-year margin improvement rather than sudden step changes. The 50-100 basis point spread between RPP and CPP, improved mix, and productivity initiatives should move margins up out of the prior range over time.

"There are no step changes, but we will be moving up out of the range as we continue to improve the business mix and drive productivity with some of the initiatives Carol outlined." — Brian Dykes (CFO)

when volumes turn positive and international step-up

Q (Ken Hoexter · BofA): He asked when volumes will inflect positive, whether Amazon negative comps persist into the first half, and about international margin acceleration.

A: They said the Amazon wrap will affect top-line volume until the second half of next year, but core volume (nearly 2% in Q3) should keep growing through 2027. Pricing is constructive with continued 200-300 basis point base pricing and mix benefit; international sees a near 20% peak step up in volume and they expect international margins in the mid to high teens as trade lanes settle.

"We will have the wrap of the Amazon volume on the top-line volume number until we get through the second half of next year." — Brian Dykes (CFO)

growth rates by vertical (healthcare, data centers)

Q (Jordan Alliger · Goldman Sachs): He asked how UPS expects growth in high-value verticals (healthcare, data centers, SMB) to progress over several years and whether B2B has inflected.

A: They said growth varies by vertical: complex healthcare logistics is about 6% per year, data center logistics is a large opportunity (they cited $15 billion and suggested it could double), and automotive should grow faster than GDP. They added that they are well positioned for data center needs, and their Digital Access work is capturing premium growth in SMB and B2B air volumes.

"I mean, if we can take healthcare, the projected growth rate in complex healthcare logistics is around 6% per year." — Carol Tomé (CEO)

Teamsters contract and tough choices ahead

Q (Bascome Majors · Stephens): He asked what hard, 'courage' decisions UPS must make over the next two years and how recent moves position the company.

A: Carol focused on the Teamster contract, noting it expires on August 1st, 2028 and that UPS aims for a constructive relationship. She said lessons from the 2023 negotiation give the company an advantage for 2028, and cited the Driver Choice Program as an example of working with Teamster leadership to reach a mutually satisfactory outcome.

"It's important to note that that comes up for renegotiation, or it expires, if you will, on August 1st of 2028." — Carol Tomé (CEO)

B2B volume detail and competition impact

Q (Brandon Oglenski · Barclays): He asked for specifics on B2B volumes in the quarter and whether Amazon's moves are creating competition for premium verticals.

A: They said B2B volumes were down year-on-year, but 60% of that decline was Amazon-related and underlying B2B performance was pleasing. They noted DAP growth ($1.3 billion U.S., $1.4 billion global in the quarter and now 30% B2B in air), said pricing among competitors looks rational, and that Amazon's recent shipping moves have not had a meaningful impact on UPS so far due to different network offers and guarantees.

"On the B2B side, we didn't disclose what the volume trends were, but they were actually down year-on-year, but 60% of the decline was Amazon related." — Carol Tomé (CEO)

peak season detail and global network benefits

Q (Brian Ossenbeck · JPMorgan): He asked for a granular view of peak season volumes ex-Amazon and ex-big shippers, and what new leadership might change in processes or efficiencies.

A: They said 100 customers drive most of the surge and those customers project a 25% lift in ADV from Q3 to Q4; total ADV will be down just slightly in Q4 because of Amazon, but ex-Amazon ADV is growing. They also said the lower 'water level' reduces rental trailers, leased aircraft and training needs, enabling a better service and cost outcome for peak; management welcomed Nando to the new role to run the global network.

"Sequentially, we're going up 4 million pieces a day from Q3 to Q4, which is a similar shape to what we've had last year and in prior peaks." — Brian Dykes (CFO)

applying US productivity internationally

Q (Nando Cesarone): He was asking what operational changes or efficiencies the new global network leader will export from the U.S. to other regions.

A: He said they will take U.S. best practices overseas and vice versa, aiming to combine them into a stronger, efficient backbone. He noted RFID already eliminates scanning of 1.9 million packages a day, those targets will continue, and automation lets them grow volume with fewer resources to improve margins.

certainty of final cost savings delivery

Q (Jonathan Chappell · Evercore): He asked if the remaining roughly $1.2 billion of the $3 billion cost savings is a slam dunk for this year or could slip into next year because of peak resource needs.

A: They said they feel comfortable hitting the $3 billion objective because much of the remaining savings are tied to hours that ramp down with Amazon volume. The roughly 1,600 people finished exiting at the end of the third quarter and buildings have been exited, so management is confident the savings are on track.

"No, we feel comfortable with it, Jonathan, because a lot of it is related to the hours that ramp down with the Amazon volume." — Brian Dykes (CFO)