United Parcel Service Q3 2026: EPS fell 11.6% to $1.37, but stripping one-offs shows ~17% growth

United Parcel Service's third-quarter 2026 revenue rose 6.7% to $22.85 billion, with all three segments growing, but diluted earnings per share (EPS) fell 11.6% to $1.37. The EPS decline is mostly about what sits in each year's numbers, not the business. This quarter carries a $182 million goodwill write-down in Supply Chain Solutions; the same quarter of 2025 carried a $330 million one-time gain from selling and leasing back property, which UPS kept inside its own "adjusted" figures. Set those aside and the underlying profit picture improved: the U.S. business earned 14.3% more on an adjusted basis while delivering 3.3% fewer packages a day, and UPS raised its full-year targets for the second quarter in a row.

This report is based on the earnings release UPS filed with the SEC on October 27, 2026 (Form 8-K, Exhibit 99.1). The full 10-Q quarterly filing is not out yet, so the detailed explanations it usually contains (fuel surcharge revenue, the breakdown of cost lines, international package volumes, share counts and buybacks) are not available for this quarter yet.

The numbers

Revenue is the sum of the three segment figures in the release. Operating margin is the share of revenue left after the costs of running the network, before interest and tax. "Adjusted" (non-GAAP) figures are UPS's own: they exclude restructuring ("transformation") costs, the goodwill write-down and a gain on selling old aircraft parts, but they do not exclude last year's $330 million sale-leaseback gain. Cost per piece is UPS's adjusted U.S. operating cost divided by the number of packages, the main efficiency measure in parcel delivery.

U.S. Domestic: fewer packages, higher prices, wider margin

U.S. Domestic revenue rose 4.5% to $14.87 billion, which the release attributes to "a 6.1% increase in revenue per piece" (the average amount UPS collects per package). Average daily volume fell 3.3% to 15.62 million packages. The quarter also had one more operating day than last year (65 vs 64), a small help to total revenue.

The planned cut in volume from UPS's largest customer (Amazon) is finished: the release says those "planned volume reductions from our largest customer were completed in the second quarter of 2026." So this quarter's 3.3% decline is the first one that the Amazon reduction does not fully explain. It matches Q2's 3.3% fall, so U.S. volume has not yet stabilised. The release does not say which customer groups were down; the 10-Q will.

Profit moved the other way. GAAP operating profit rose 50.2% to $906 million (a 6.1% margin, from 4.2%), helped by lower restructuring charges ($171 million this quarter against $302 million a year ago). On UPS's adjusted basis, operating profit rose 14.3% to $1,034 million and the margin widened to 7.0% from 6.4%. Adjusted cost per piece rose 5.5% to $13.32, slower than the 6.1% rise in revenue per piece. Both rates slowed from Q2 (9.3% and 8.0%), so the gap between price and cost is holding, not widening.

The cost program is the reason. UPS says its Network Reconfiguration and Efficiency Reimagined initiatives (closing buildings, consolidating vehicles, aircraft and staff, and redesigning processes) delivered about $1.8 billion of savings in the first nine months, up from about $1.2 billion at mid-year, and it still expects nearly $3 billion for 2026.

International: margin back up

International revenue rose 7.1% to $5.01 billion, "driven by a 15.0% increase in revenue per piece." Operating profit rose 10.4% to $746 million and the margin was 14.9%, against 14.5% on a GAAP basis (14.8% adjusted) a year ago. That is a clear recovery from Q2, when the segment's margin fell to 12.4% on charter flights and rerouting around the Middle East conflict.

One caution: revenue up 7.1% with revenue per piece up 15.0% implies UPS moved meaningfully fewer international packages, though the release gives no international volume figure and segment revenue also includes non-package items. Part of the per-piece increase in Q2 came from fuel surcharges and a shift toward longer Asia trade lanes; the release does not say how much fuel contributed this quarter.

Supply Chain Solutions: strong sales, a write-down, and a tough comparison

The logistics and freight-forwarding segment grew revenue 18.2% to $2.98 billion, "primarily due to growth in forwarding and logistics, including healthcare." That is much faster than Q2's 7.8%. Part of the healthcare growth likely reflects the Andlauer Healthcare Group purchase in late 2025, but the release does not split acquired from organic growth.

The segment's profit lines are distorted twice:

• This year: a $182 million goodwill impairment for one SCS reporting unit, the release does not say which. Goodwill is the premium UPS paid for past acquisitions over their asset value; writing it down means UPS now expects that business to earn less than it assumed when buying it. GAAP operating profit fell 82.5% to $92 million (3.1% margin).
• Last year: the $330 million sale-leaseback gain, which sits inside both GAAP and adjusted 2025 profit. UPS's adjusted SCS profit fell 48.9% to $274 million, but without the gain the year-ago figure was about $206 million, so adjusted profit actually rose about 33%, and the adjusted margin improved to 9.2% from about 8.2%.

What the headline numbers hide

The GAAP-to-adjusted gap is $0.32 a share and mostly non-cash this time. UPS excludes $130 million after tax of transformation costs ($0.15 a share), the $182 million goodwill write-down ($0.21) and a $33 million gain on selling previously written-off MD-11 aircraft parts (−$0.04). Unlike Q2, when the gap was a cash driver buyout, the biggest item here is an accounting write-down. Transformation costs are still large, though: UPS now expects $1.4–1.6 billion for 2026, up from $1.3–1.5 billion, of which $1.2 billion is the Driver Choice buyout, and it had incurred $1.4 billion by September 30.

Last year's base was flattered twice. Q3 2025 GAAP EPS of $1.55 included the $330 million sale-leaseback gain ($0.30) and an $86 million tax benefit from reversing a valuation allowance ($0.10). That is why the GAAP tax rate jumps to 26.0% this quarter from 18.4% (income tax of $408 million on $1,571 million of pretax income, against $296 million on $1,607 million). On UPS's adjusted basis the tax rate barely moved (23.3% vs 23.8%).

Adjusted EPS growth, like for like, came from operations. Removing the $0.30 gain from last year's $1.74 leaves about $1.44, so this quarter's $1.69 is up about 17%. Adjusted operating profit excluding the gain rose about 14% ($2,054 million vs about $1,802 million), and lower other expenses (interest and pension items) and a slightly lower tax rate added the rest. Diluted share counts are not in the release, but net income divided by EPS points to roughly the same number of shares as a year ago; UPS bought back no stock in the first half of 2026, per its Q2 10-Q.

Cash conversion is strong, with caveats. Nine-month operating cash flow was $5,986 million, 2.3 times net income of $2,631 million, and up 16.3% from $5,148 million. Free cash flow (operating cash flow minus capital spending, net of asset sale proceeds) rose to $4,220 million from $2,744 million, helped as much by capital spending falling to $2,221 million from $2,969 million as by operations. Using the first-half figures in our Q2 report, third-quarter operating cash flow was about $2.9 billion. In Q2, some cash came from tariff refunds owed to customers and a new receivables-selling program; whether those still contributed will only be visible in the 10-Q.

The guidance raise is again mostly revenue. UPS raised full-year revenue to about $92.6 billion from about $91.2 billion (+$1.4 billion) but adjusted operating profit only to about $8.75 billion from about $8.65 billion (+$100 million). That implies an adjusted margin of about 9.4%, slightly lower than the 9.5% implied in July. Extra revenue at thin margins is consistent with fuel surcharges and fast-growing, lower-margin logistics revenue, rather than a step up in the core parcel business.

On balance the quarter is understated: GAAP EPS fell 11.6%, but with this year's $182 million write-down and last year's $330 million gain and $86 million tax benefit set aside, earnings per share grew about 17%.

Takeaway: The 11.6% EPS decline is an accounting comparison, not a weaker UPS. Excluding last year's one-time sale-leaseback gain, adjusted EPS rose about 17%, and the U.S. business widened its adjusted margin to 7.0% with prices rising faster than costs. The weak spot is volume: U.S. daily packages fell 3.3% even with the Amazon cuts finished, so the margin gains still depend on cutting costs, not on growth.

Did last time's read hold up?

Our Q2 report flagged five things to watch. Mostly, they went UPS's way:

• The second half needed about $5.2 billion of adjusted operating profit. Q3 delivered $2.05 billion and Q4 is guided at about $3.3 billion, about $5.35 billion together. On track.
• Whether U.S. volume would stabilise once the Amazon cuts were out of the comparison. It did not: daily volume fell 3.3%, the same as in Q2.
• Whether International's 12.4% margin was the low point. It was: the margin recovered to 14.9%.
• Goodwill risk in SCS. We noted UPS's own warning that its freight-forwarding and healthcare logistics units had little cushion above their book value. This quarter UPS recorded a $182 million goodwill impairment in an SCS reporting unit.
• About $100 million of further separation costs in Q3. Transformation costs were $171 million in Q3, and UPS raised its full-year estimate by $100 million.

What to watch next

Management's guidance, from the October 27 release:

• Q4 2026: revenue of about $25.7 billion and adjusted operating profit of about $3.3 billion.
• Full-year 2026: revenue of about $92.6 billion (was about $91.2 billion), adjusted operating profit of about $8.75 billion (was about $8.65 billion), adjusted EPS of about $7.28 (was about $7.22), adjusted free cash flow of about $6.1 billion, capital spending of about $3.0 billion, dividends of about $5.4 billion, a tax rate of about 23% and $1.3 billion of pension contributions.
• Savings: nearly $3 billion in 2026, against $1.8 billion delivered through September. Efficiency Reimagined runs to the fourth quarter of 2027, so transformation charges will keep appearing in GAAP results for another year.

Our read: the Q4 target is demanding but consistent with the run rate. Nine-month adjusted EPS was $4.52, so about $2.76 must come in Q4, roughly $1.07 more than Q3. The holiday peak and about $1.2 billion of savings still to be booked this year make that plausible. The bigger question for 2027 is volume. With the Amazon reduction complete, U.S. packages are still falling about 3% a year, so margins can only keep rising while the cost program has buildings left to close. Watch the 10-Q for how much of the revenue growth was fuel surcharges, which customers drove the volume decline, which SCS unit took the write-down, and international package volumes.