A United Parcel Service (UPS) vehicle reverses into a facility in Queens, New York City, U.S., May 9, 2022. REUTERS/Andrew Kelly

By Abhinav Parmar and Lisa Baertlein

(Reuters) -United Parcel Service posted better-than-expected quarterly results on Tuesday, in an early sign that its overhaul, which has included cutting 48,000 jobs this year, is making headway after several quarters of weak demand.

Shares in the world's biggest parcel delivery firm surged nearly 13% in early trading, with rival FedEx also gaining almost 3%. UPS shares had been down about 28% since the start of the year.

The results signal progress in UPS' efforts to rebuild profitability and stabilize volumes after a bruising year where President Donald Trump's erratic tariff policy and the end of U.S. duty-free, "de minimis" treatment on low-value e-commerce shipments pummeled delivery volume.

"In 2025, we're witnessing the most profound shift in trade policy in a century," CEO Carol Tome said on a call to discuss the third-quarter results.

UPS' self-imposed reduction in deliveries for Amazon.com, its largest customer, has intensified that pressure.

To shelter profits, the Atlanta-based company has reduced employee rolls by 48,000 versus a year ago, slightly more than expected, and has closed a total of 93 facilities so far this year.

The small package delivery business that UPS dominates posted a 9.8% increase in revenue per piece and a rise of 10 basis points in operating profit in the third quarter, despite a 12.3% drop in average daily volume.

"The cash flow pressures we saw in the second quarter eased during the third quarter," CEO Tome said.

The company also projected revenue of $24 billion for the crucial fourth quarter, when holiday deliveries and related returns can double daily delivery volumes. Analysts on average were expecting quarterly revenue of $23.8 billion, according to data compiled by LSEG.

Early indications from retail customers suggest they expect a good peak with a "considerable surge" in volume, Tome said. Nevertheless, UPS expects average daily volume to be down on a year-over-year basis for the holiday peak season that stretches from late November into January due to the reduction in Amazon deliveries.

UPS retail customers include Walmart, Target, Macy's and many others. It also has a significant returns business.

The results released on Tuesday quelled fears that the company's dividend could be cut if expense cuts lagged falling volumes. Unlike UPS, rival FedEx does not have a unionized workforce to grapple with as it slashes overhead.

Evercore ISI analyst Jonathan Chappell said expectations were "very low" ahead of the report. The return of fourth-quarter revenue guidance, and one that topped Wall Street expectations, could prompt investors who had bet against the stock to buy back shares, he said.

CLOSING FACILITIES, CUTTING JOBS TO SAVE $3.5 BILLION

UPS has been shuttering hundreds of facilities, slashing thousands of jobs and offering buyouts to its union drivers as part of its largest-ever overhaul, which aims to reduce costs by $3.5 billion in 2025.

UPS reported an adjusted profit of $1.74 per share for the three months ended September 30, beating analysts' average expectations of $1.30.

The company reported consolidated revenue of $21.4 billion, above expectations of $20.8 billion.

It reported an adjusted consolidated operating margin of 10%, up from 8.8% in the second quarter. That margin was 6.4%, down from 7% in the second quarter, in the domestic segment, its largest.

UPS expects adjusted operating margin for the fourth quarter to be between 11% and 11.5%.

(Reporting by Abhinav Parmar in Bengaluru and Lisa Baertlein in Los Angeles; additional reporting by Shivansh Tiwary; Editing by Joe Bavier and Paul Simao)