UPS Earnings Rise as Higher Prices Offset Shipping Slowdown |

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United Parcel Service Inc.’s profit climbed in the third quarter despite a downtick in shipping volumes as higher prices buoyed the business.

UPS

UPS -0.33%

Chief Executive Carol Tomé said the global economy outside the U.S. softened in the third quarter, but the delivery company managed to adjust its networks to changes in parcel volume.

Overall revenue for the Atlanta-based delivery company rose 4.2% to $24.2 billion, as revenue per piece shipped rose 8.6%, offsetting a 2.1% decline in the volume of packages.

The drop in shipping levels from a year ago is the latest sign of slackening demand across various modes of transportation ahead of what is typically the industry’s busiest time of the year. UPS rival

FedEx Corp.

last month reported steeper drops in shipping volumes amid a global economic slowdown, while cargo shipowners and trucking companies are also facing declines in demand.

UPS expects overall parcel volume in the coming peak period to decline from a year earlier, judging from its contracts with shippers. UPS executives added that they expect peak to be a little later this year, as inventory levels are in better shape than last year, when consumers were encouraged to shop earlier. There is also an extra delivery day during this peak season.

“We have not seen any demand destruction at this point,” Ms. Tomé said.

While UPS has been able to increase its revenue-per-piece by 23% since 2019, the company is planning to make more changes internally, such as introducing more automation in its sorting facilities, to keep profit margin growth. If the company is able to squeeze savings out of its operations, it would be willing to pass some of those back to customers, said Ms. Tomé.

The company is planning to place more resources on improving productivity, in its new “bigger and bolder” strategy, a change from “better, not bigger” that had been focused on delivering more profitable packages.

There is uncertainty in the economic outlook for the U.S., with rising interest rates to tame high inflation trickling into consumer spending. “We’re going to build more agility to our plan than we’ve seen before. We have to be able to turn on a dime,” said Ms. Tomé.

Consumer spending has held up relatively well so far despite inflation, but experts say we’re approaching an inflection point. WSJ’s Sharon Terlep explains the role “elasticity” plays in a company’s decision on whether to raise prices. Photo illustration: Adele Morgan

While higher than last year, UPS’s quarterly revenue was under analysts’ expectations of $24.31 billion, according to FactSet. Earnings came in at $3.1 billion, up from $2.3 billion a year ago. Stripping out one-time items, adjusted earnings were $2.99 a share, topping analyst expectations of $2.84 a share, according to FactSet.

For the full year, UPS said it affirms expectations that revenue will reach $102 billion and adjusted operating margins at 13.7%, along with reduced capital expenditure by $500 million to $5 billion.

UPS’s drop in shipping was comparatively less than FedEx’s. In its quarter ended Aug. 31, FedEx said shipping volumes fell 11% across its Express unit and 3% in its domestic Ground unit.

UPS and FedEx have been raising shipping prices to offset a global slowdown. Both carriers said they plan to raise shipping rates an average of 6.9% across most of their services, following an increase of 5.9% in 2022 and 4.9% in preceding years.

UPS shares eased 0.3% Tuesday, and are down about 20% this year.

Write to Dean Seal at dean.seal@wsj.com and Esther Fung at esther.fung@wsj.com

Corrections & Amplifications
UPS Chief Executive Carol Tomé said, “We have not seen any demand destruction at this point.” An earlier version of this article incorrectly quoted her as saying “demand for destruction.” (Corrected on Oct. 25)

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