Demand for delivery boosts UPS revenue, but costs rise too

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In this July 27, 2020 file photo, the tails of three UPS aircraft are shown parked at Miami International Airport in Miami. UPS, whose brown delivery trucks have become omnipresent on neighborhood streets during the pandemic, is reporting strong profits and revenue in its most recent quarter. (AP Photo/Wilfredo Lee, File)

ATLANTA – Profit and revenue are rising at UPS, whose brown delivery trucks have become omnipresent on neighborhood streets during the pandemic, but so are costs.

The company reported Wednesday that third-quarter profit rose 12% to $1.96 billion. With higher volume of packages to deliver, revenue climbed 16% to $21.24 billion. Both figures beat expectations.

However, operating profit in the company’s key U.S. package business was nearly 10% less profitable than a year ago because of higher costs as UPS hired workers and expanded service.

UPS shares fell 8.8%, their biggest one-day percentage drop in nearly six years.

With so many people getting what they need delivered to the front door, drivers for United Parcel Service Inc. are staying busy. The company's consolidated average daily volume jumped 13.5%.

Prices were roughly constant, with the average price per piece rising for U.S. ground shipments and slipping slightly for express deliveries like next-day air.

Unlike the domestic package business, profit rose in the company's international package and freight units.

New CEO Carol Tome said the results were led by strong demand for shipments leaving Asia and growth among small and medium-sized businesses. She said the higher profit indicates that the company's “better, not bigger” strategy is working.