Get rid of Amazon's cheap packages! United Parcel (UPS.US) focuses on high-profit business results and drastically raised its annual revenue guide to US$91.2 billion

Zhitong Finance App learned that United Package (UPS.US) raised sales expectations for the whole year, which indicates that as the courier company strives to shift its business focus from low-profit e-commerce packages to more profitable packages, it is benefiting from strong pricing capabilities. According to financial reports, the company's second-quarter revenue reached $22.8 billion, up 7.5% year over year, exceeding expectations of $960 million; adjusted earnings per share were $1.76, higher than the forecast of $1.67.

United Parcel said in a statement releasing its quarterly earnings report on Tuesday that this year's revenue will reach approximately US$91.2 billion, higher than the previous forecast of US$89.7 billion. This figure broke analysts' average estimate of $90.4 billion. The company expected adjusted earnings per share of $7.22, which also beat expectations.

This improved performance outlook is a positive sign that United Parcel is completing an 18-month effort to divest its low-profit business from Amazon. Amazon has long been its biggest customer, but its business has failed to significantly increase the company's net profit.

The company is betting on a leaner transportation network, a stable pricing strategy, and a more profitable business portfolio to strengthen its business while demand continues to subside.

CEO Kyrol Domme said in a statement, “Our second-quarter results marked a significant turning point in our operating performance in line with expectations.” She had previously hinted that the company would reach an inflection point in the middle of this year, because according to the plan, the company will remove more than half of the Amazon package volume from its shipping network by June.

Domei once said that low-profit e-commerce packages have a “diluting effect” on profits. As an alternative, United Parcel is currently focusing on fewer packages with higher profit margins. This includes complex healthcare shipping, international parcels, and businesses targeting small to medium businesses — which don't get discounts as easily as large enterprise-level customers.

Meanwhile, competition in the parcel delivery sector is intensifying. In recent months, Amazon has repeatedly announced the opening of its logistics network to third-party merchants, which investors see as a threat to traditional carriers. However, United Parcel and rival FedEx argue that these alternative carrier systems were built for e-commerce packages that they (United Parcel and FedEx) have voluntarily abandoned.

Still, that means United Parcel and FedEx are vying for a smaller share of the market. Demand for direct-to-consumer e-commerce packages continues to grow, while commercial and industrial demand has stagnated.

Although high oil prices caused by the Middle East war have taken a toll on the overall economy, United Parcel, like the broader freight sector, uses surcharges to offset rising costs.

Investors are also wary of cost pressures, particularly as United Parcel faces rising labor costs associated with the expiration of Teamsters Union's existing labor agreement, and a new round of negotiations that followed.