Analysts at UBS Securities have trimmed their profit forecast for United Parcel Service just days before the parcel delivery giant is due to report third-quarter results on Oct. 27. The investment bank now expects UPS to earn $1.63 per share in the quarter, down from its previous estimate of $1.67, and it slightly lowered its fourth-quarter view to $2.70 from $2.72.
The revision is not really about packages or trucks. The key driver is a higher estimate for UPS's diluted share count — the number of shares used to calculate per-share profit. UBS raised that figure to 853 million from roughly 837 million, meaning the same pool of earnings is now spread across more shares, which mathematically reduces earnings per share.
Why a bigger share count matters
Earnings per share, or EPS, is one of the most closely watched numbers on Wall Street. It is calculated by dividing a company's net profit by its diluted share count — a measure that includes not just common stock but also potential shares from stock options, restricted stock units and convertible securities. When the denominator grows, EPS shrinks even if total profit is unchanged.
For UPS, the higher share count likely reflects the company's employee compensation practices, which often involve issuing stock-based awards. Companies in this position frequently see their share count drift higher over time, and analysts periodically update their models to reflect that. It is a technical adjustment rather than a sign of operational trouble, but it still affects the headline number investors see.
UBS also noted that lower fuel costs in US domestic operations should provide some benefit to the quarter. Fuel is a major expense for parcel carriers, and when diesel and jet fuel prices fall, it can improve margins — at least temporarily. However, UPS typically passes some fuel costs through to customers via surcharges, so the net benefit can be smaller than it first appears. In this case, UBS's view is that the fuel tailwind is not enough to fully offset the larger share count.
The broader backdrop for UPS
UPS has been navigating a complicated freight environment. After the pandemic-era surge in e-commerce deliveries, parcel volumes normalized, and the company has spent recent quarters cutting costs, streamlining its air network and renegotiating its relationship with its largest customer, Amazon. The company also reached a new labor agreement with the Teamsters union in 2023, which raised wages but removed a major source of uncertainty.
Investors have been watching whether those efforts translate into steadier profits. UPS's results are often read as a barometer of broader economic activity, since the company moves goods for retailers, manufacturers and small businesses alike. A weak quarter can signal softer consumer demand or slower industrial activity; a strong one can suggest the opposite.
The macro backdrop adds another layer. Recent data has shown a cooling US labor market, with September hiring slowing more than expected, which has shifted expectations around Federal Reserve interest rate policy. Lower rates would generally be welcome news for economically sensitive stocks like UPS, but the timing and pace of any cuts remain uncertain.
What it means for investors
For everyday investors, the UBS revision is a reminder that analyst estimates are moving targets — especially in the days right before a company reports. A two-cent cut to a quarterly EPS estimate is small in isolation, but it can influence the market's expectations and, by extension, how the actual result is received.
When UPS reports on Oct. 27, the key questions will be:
- Volume trends: Are package volumes stabilizing or still declining? Management's commentary on daily volume will matter more than the headline EPS.
- Margins: Can UPS hold onto cost savings from its network changes? Fuel is a swing factor, but labor and efficiency gains are more durable.
- Guidance: Investors will want to know whether UPS reaffirms or adjusts its full-year outlook, which would give a clearer read on the fourth quarter and into next year.
- Share count: Any update on buybacks or dilution will help clarify whether the higher share count is a one-time adjustment or a longer-term trend.
It is also worth noting that UBS itself is in the news. The Swiss bank is reportedly exploring a possible headquarters move as Switzerland weighs tougher capital rules — a reminder that analyst research comes from institutions with their own strategic considerations, though that does not diminish the relevance of their models.
For now, the takeaway is straightforward: UPS heads into its earnings report with slightly lower expectations than a week ago. The company's ability to offset cost pressures and manage its share count will determine whether the stock gets a lift or a shrug after the numbers land. Investors should focus on the operational details — volumes, margins and guidance — rather than the small EPS tweak alone.
