The paragraph is from the UPS Third Quarter 2024 Earnings Conference Call. Greg Alexander introduces the call, then hands over to PJ Guido, the Investor Relations Officer. PJ Guido welcomes participants and mentions that CEO Carol Tome, CFO Brian Dykes, and other executives are present. PJ highlights that some statements made will be forward-looking and subject to risks as detailed in previous SEC filings. The discussions will focus on non-GAAP adjusted results, with specific numbers given for GAAP results, including a net gain and transformation strategy costs related to divesting Coyote Logistics. Additional financial details are available in the webcast materials on the UPS Investor Relations website, and the call will end with a Q&A session.

In the paragraph, Carol Tome discusses UPS's financial performance in the third quarter. Despite facing a challenging macro environment with slower online sales and lower manufacturing activity both in the U.S. and internationally, UPS managed to grow its revenue and profit. The company's consolidated revenue was $22.2 billion, a 5.6% increase from last year, with a 22.8% rise in operating profit and an 8.9% operating margin. In the U.S., UPS experienced its second consecutive quarter of average daily volume growth, marking their highest year-over-year growth rate since early 2021. Internationally, the volume growth was stable, and in Supply Chain Solutions (SCS), air and ocean forwarding drove strong revenue growth.

The paragraph discusses the company's performance in the U.S. commercial sector during the quarter, highlighting a nearly 1% growth in B2B volume, with a focus on retail B2B through store replenishment solutions. These include innovations like daily inventory replenishment with a two-hour delivery window and RFID technology to reduce stockouts. The company has focused on improving revenue quality by responding to changes in e-commerce package flow with strategic pricing and optimizing operations using advanced pricing technology. This has resulted in improved revenue per piece growth, and cost management efforts, such as restructuring management, are exceeding expectations.

The company has completed 45 operational closures this year and aims to become the leading complex healthcare logistics provider globally. They plan to achieve this by pursuing inorganic growth opportunities, such as acquiring Frigo-Trans to boost their temperature-sensitive healthcare logistics in Europe. Frigo-Trans specializes in cold-chain transportation and has temperature-controlled warehousing capabilities. The acquisition is expected to close in the first quarter of next year. The company is investing in growing its healthcare logistics business, evidenced by $2.5 billion in healthcare revenue in the third quarter. Internationally, they have expanded Saturday delivery in eight major European markets and accelerated shipments to over 35 countries in Asia, Africa, and the Middle East.

The company is expanding its operations to meet the demand for the upcoming peak holiday season by adding over 200 flights connecting Asia to Europe and the U.S. Their Digital Access Program is driving growth in both B2B and B2C segments, with $2.3 billion in global GAAP revenue generated in the first nine months and an expectation of over $3 billion for the year. They have successfully onboarded their air cargo business with the USPS, which is expected to provide consistent revenue. Emphasizing safety, the company has seen significant improvements in reducing injuries and accidents, particularly in auto safety in the U.S., aided by innovative training programs. The Circle of Honor now includes nearly 10,000 drivers with 25 accident-free years. For the peak holiday season, despite a compressed shipping period, the company is leveraging its industry-leading service and collaborating with customers on volume expectations and promotions to maintain high performance.

The paragraph discusses the company's preparedness for the upcoming holiday season despite tempered volume expectations from shippers. The company plans to use network planning tools and technologies to efficiently manage and deliver increased package volumes on peak day, December 18th, at a higher productivity rate. This efficiency is attributed to improvements and the use of experienced seasonal support drivers. Financially, the company is focused on a "better, not bigger" approach, emphasizing revenue quality and strategic moves such as acquiring the USPS air cargo business and divesting from Coyote. These actions are expected to stabilize revenue and improve margins. Consequently, the company anticipates consolidated revenue of around $91.1 billion for the year and an operating margin target of 9.6%.

In the third quarter, the company achieved revenue and profit growth for the first time in two years, with a 5.6% increase in revenue to $22.2 billion and a 22.8% rise in operating profit. The U.S. domestic segment's performance was boosted by strong volume growth and cost management, resulting in a 4.1% decrease in cost per piece. Ground average daily volume grew by 8.9%, although air volume decreased by 6.3% as customers shifted towards ground services. The SurePost service saw increased volume due to improvements in the company's matching algorithm, enhancing delivery density. Additionally, B2B average daily volume rose by 0.8%, marking an increase for the first time in two years.

In the third quarter, growth was led by small and medium-sized businesses (SMBs) with a 3.8% increase in B2B average daily volume, while B2C volume grew 11% but saw a slight decline in its share of total volume. SMBs accounted for 29.4% of U.S. volume, with U.S. domestic revenues reaching $14.5 billion, up 5.8% from the previous year. Although revenue per piece declined 2.2% year-over-year, it improved by 40 basis points from the second quarter. The increase in base rates boosted revenues by 170 basis points, while factors like product mix and customer changes decreased it by 390 basis points. Labor contract costs were initially high, but Union wage growth slowed to 5.2% year-over-year. Efficiency improved through 45 operational closures under the Network of the Future initiative, resulting in an 8% enhancement in pieces per workforce hour and an 11 million hour efficiency gain.

In the third quarter, production improvements and safety performance enhancements offset half of the union wage increase for a company, which saw significant financial growth across its segments. The U.S. domestic segment achieved a 46.5% increase in operating profit with an improved operating margin. The International segment also posted revenue and operating profit growth, driven by strong exports, with operating margin rising by 220 basis points. Costs were kept flat due to network optimization and cost management. Revenue for Supply Chain Solutions increased by 8% year-over-year, boosted by strong demand in air and ocean forwarding, positive impacts from acquisitions, and new air cargo contracts, although this was slightly offset by weaknesses in the truckload brokerage business.

In the third quarter, Supply Chain Solutions (SCS) saw a $58 million drop in operating profit year-over-year, resulting in $217 million. This decrease was mainly due to efforts to configure the air network as they onboarded USPS air cargo business, which is now expected to provide stable revenue and attractive margins. The third quarter's operating margin for SCS was 6.4%. The income statement revealed $230 million in interest expenses, $68 million in other pension income, and a 21% effective tax rate. Year-to-date, the company generated $6.8 billion in cash from operations and $4 billion in free cash flow, and refinanced $1.5 billion in current maturities. They ended the quarter with strong liquidity and no outstanding commercial paper, having paid $4 billion in dividends and completed a $500 million share repurchase. The updated financial outlook anticipates $91.1 billion in full-year revenue, considering third-quarter results, the sale of Coyote, and softer peak volume forecasts. They increased their consolidated operating margin expectation to 9.6%, reflecting new volume and revenue projections, with further insights on segment performance expected in the fourth quarter.

The article paragraph provides a financial outlook for a company, discussing expectations for the fourth quarter and the upcoming year. The company anticipates a 1.5% increase in revenue from U.S. domestic volume and revenue per piece growth, with an expected operating margin of 9.5% in the fourth quarter and slightly over 10% in December. International revenue growth is projected to be in the mid-single digits year-over-year, with a 20% operating margin. Supply Chain Solutions revenue is expected to be $3.3 billion, with a 9% operating margin. The company plans for a $5.1 billion free cash flow in 2024, following a $1.4 billion pension contribution, and expects $4 billion in capital expenditures. They plan to pay $5.4 billion in dividends, pending Board approval, and anticipate a tax rate between 23% and 23.5%. The article ends with a question and answer session, where David Vernon from Bernstein asks about the realistic drivers of the company's projected operating profit increase from the third to fourth quarter and the implications for 2025 profitability, to which Brian Dykes responds.

The paragraph discusses a company's financial performance, specifically an increase in profits from Q3 to Q4 due to various strategic initiatives like improving revenue through pricing policies and increased take rates on HCS. The company is seeing benefits from productivity initiatives like "Fit to Serve" and "Network of the Future," which have positively impacted costs. They are confident in these strategies and expect to see a positive impact moving into 2025, projecting domestic margins to be around 9.5%, rising slightly above 10% by year-end. During a Q&A, Brian Ossenbeck from JPMorgan asks about the effects of a softer peak season, customer feedback, and any resistance to pricing changes, to which Carol Tome begins to respond by noting they work with over 100 key customers responsible for most of their network volume.

The paragraph discusses the development of operating plans for customers, which have been adjusted based on tempered forecasts for the holiday season. External forecasts have decreased, with ESMO's fourth-quarter forecast dropping from 5% to 3%, and holiday season predictions varying widely. The tight shipping period with only 17 days between Thanksgiving and Christmas is anticipated to impact consumer shopping behavior, possibly leading more customers to shop in stores. Despite these challenges, the company expects a strong peak season, projecting to deliver 2 million more packages than last year. Additionally, the company is seeing positive responses to their holiday pricing surcharges and is prepared to handle the expected volume, with a focus on collaboration with their top 100 customers.

In the paragraph, the speakers discuss how their company has structured a process to manage holiday demand surcharges with flexibility at the customer level during the peak season. They emphasize the importance of creating value for customers and maintaining strong forecast processes. Carol Tome and others mention a strong "keep rate," indicating customer retention or satisfaction. Brian Dykes adds that changes to the peak season surcharge have led to year-over-year performance improvements. Chris Wetherbee from Wells Fargo asks about the cost improvements in domestic operations, particularly regarding a 4% reduction in costs per piece, and how these improvements and other initiatives might progress into the fourth quarter and 2025. Carol Tome suggests Brian Dykes address the immediate question about the fourth quarter before turning to Nando for broader insights. Brian Dykes responds by noting the exceptional cost performance in the third quarter.

In the paragraph, the company discusses a decline in wage inflation from 12% to 5.2% and expects a normalized level in Q4. They've accelerated their "Fit to Serve" strategy, leading to outperformance in cost management, with operational closures of 45 locations and 9 buildings. An increase in automated facilities processing 5% more volume and improvements in production indices have contributed to reducing work hours by 11 million compared to the previous year, enhancing productivity and network efficiency. The focus remains on scrutinizing costs across the business while maintaining high service levels, as highlighted by Carol Tome from UPS.

In the paragraph, Nando highlights that their processing hubs have automated 63% of their volume, an increase of 5 percentage points from the previous year. Brian Dykes discusses their confidence in 21 active projects this quarter, despite it being peak season, as they foresee significant productivity improvements and plan to accelerate projects for 2025. Tom Wadewitz from UBS asks about the margin improvement amidst an industrial economy weakness, to which Carol Tome responds by praising her team's management over recent years and notes business improvement outside the United States. Kate Gutmann confirms domestic growth, using the quarter as a positive example despite potential ongoing industrial softness.

The paragraph discusses the company's strong international business performance, achieving an 8% margin despite declining macro indicators. They aim to maintain this by focusing on automation in domestic operations and optimizing revenue quality for international operations. The strategy includes increasing capability rather than lowering prices to gain market share, exemplified by their free Saturday delivery service in eight markets. This approach has led to better-than-expected performance in Europe and Canada, growth in cross-border trade, and increased revenue per piece. Domestically, the company emphasizes productivity, with all aspects under review to exceed expectations.

The paragraph involves a discussion between Brian Dykes and Carol Tome about the company's cost structure and strategies for commercial growth. Brian mentions that they have a contract that stabilizes 60% of their domestic costs for the next four years, enabling them to focus on revenue quality and growth in commercial and SMB sectors. Carol highlights their success in the third quarter with the introduction of RFID labels, which helped secure a new commercial customer. The conversation then shifts to a question from Jordan Alliger of Goldman Sachs, who inquires about the transition of U.S. Postal onboarding and its impact on profitability and operations, following the expiration of the USPS contract with their previous carrier on October 1st.

The paragraph discusses the collaboration and planning efforts between a company and the USPS to manage an increased volume of service ahead of a peak period. The two teams have been working well together, with positive feedback from the Postmaster General. The heavy task involved integrating over 50 million cubic feet of volume into the network during the third quarter, with more expected in the fourth quarter. The performance of this operational model is anticipated to differ significantly in the fourth quarter. There's also mention of an ongoing negotiation for a delivery service agreement related to SurePost and Sunday delivery, with an inquiry from Bascome Majors about the status of these negotiations.

The paragraph involves a discussion during a conference call about the challenges and opportunities related to a potential agreement between USPS and UPS. Carol Tome and Matt Guffey discuss efforts to finalize a contract that benefits both parties, with expectations to conclude soon. Bascome Majors inquires about the contract's expiration, and it's noted that updates will be provided in the fourth quarter earnings. Ari Rosa from Citigroup asks about excess capacity in the network given weaker demand and industrial production, highlighting considerations for resource planning amidst a challenging macroeconomic environment.

In the discussion, Carol Tome and Brian Dykes address questions about the company's capacity management and financial outlook. Tome mentions that the team has efficiently reduced market capacity by closing 45 operations, removing about 1 million ADV per day. During the holiday peak, resources are being added, but overall, capacity is decreasing. When asked about the impact of the USPS contract on the fourth-quarter U.S. margin, Dykes explains that there is no incremental impact on domestic operations, and startup costs only affected SCS. They anticipate SCS margins returning to about 9% and domestic margins to around 9.5% in the fourth quarter. Tome adds that a more detailed outlook for 2025 will be provided after the fourth quarter, in response to a question on significant future margin improvements.

The paragraph features a discussion during an earnings call, where Stephanie Moore from Jefferies asks about domestic revenue per piece trends. Brian Dykes explains that there was positive momentum from Q2 to Q3, with base rate improvements significantly contributing to revenue per piece growth. Looking ahead to Q4 and 2025, Dykes expects further positive inflection in the U.S., driven by strategic actions, demand channels, surcharging, and general rate increases. Carol Tome adds that their pricing architecture is transitioning towards a more analytical approach, utilizing modifiers to adjust prices effectively.

In the third quarter, the company tested pricing elasticity by reducing a discount modifier by 25%, which led to a 12% increase in revenue per piece (RPP) but a 26% decrease in volume. This strategy, which doesn't require contract renegotiation, is part of a broader pricing approach they plan to use moving forward. Addressing a question about revenue per piece, Brian Dykes acknowledged the industry's competitive pricing but noted it's rational, emphasizing the importance of winning through superior service and capabilities like RFID. The company has experienced commercial growth, with enterprise wins and a 3.8% increase in small and medium-sized business (SMB) commercial sectors, aiding in RPP growth despite the competitive market.

In the paragraph, Brandon Oglenski from Barclays asks about enterprise customers and the "glide down" arrangement, as well as the "Fit to Serve" initiative. Carol Tome responds by explaining that their largest customer is responsible for a significant reduction in air volume, as they are shifting from air to ground transportation and utilizing their network more. Despite this, it creates growth opportunities in other areas. Brian Dykes mentions that the "Fit to Serve" program is expected to generate an additional $70 million in the fourth quarter, totaling about $350 million. Adam Rakowski, speaking for Ken Hoexter from Bank of America, inquires about the expanded scope of the "Fit to Serve" initiative, which involves reducing 12,000 positions, and whether this has accelerated in the current quarter.

In the paragraph, Carol Tome and Brian Dykes discuss the status of the Fit to Serve initiative, noting that they have achieved the expected savings and anticipate additional benefits in the fourth quarter. They emphasize their focus on enhancing customer experience and productivity. Ravi Shankar from Morgan Stanley questions their decision to increase holiday hiring despite potential volume reductions and customer expectations. Carol Tome explains that they are hiring 125,000 people for the holiday season, compared to 100,000 the previous year, as they expect positive volume growth. She clarifies that they aim to hire just enough staff to meet peak demands without over-hiring.

In this conference call, Ravi discusses the company's ability to quickly issue or rescind job offers, allowing flexibility in staffing. Nando Cesarone adds that they are increasing their helper teams with drivers by about 10% to handle the Christmas peak season, optimizing every position. The call concludes with thank-yous from Ravi Shankar, PJ Guido, and the call operator.

This summary was generated with AI and may contain some inaccuracies.