UPS CEO Carol Tomé Talks Outlook After Scaling Back Amazon Ties

**SPEAKER_1** (0:02)
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**Romaine Bostick** (0:07)
Shares of UPS down about 6%.
After the company reported earnings this morning, the company did actually beat on most of the main metrics, adjusted EPS above analyst estimates, revenue in the quarter above analyst estimates, and the company boosting its full year sales forecast, as well as providing an adjusted earnings forecast ahead of analyst estimates. A testament here to a lot of changes that the CEO has made over the last few months to wean themselves off some of the lower margin business and move deeper into some of the higher margin products and services. Pleased to say that the CEO of UPS, Carol Tomé, she joins us right now on the heels of that earnings report. And Carol, I do want to start off with the guidance for the rest of the year. It looks relatively strong. And I know you've talked in the past that not only 2026 would be a good year for this company, but you alluded last quarter that 2027 could potentially be even better. Are we still on track to see that?

**Carol Tomé** (1:04)
Well, Romaine, it's good to be with you. And, you know, I'm delighted to say that we launched a strategic transformation of our company So, we started about 18 months ago to glide down Amazon volume and reconfigure our network, and we did that. And then we returned to profit and revenue growth, and as you look to the guidance for the balance of the year, we will continue to grow our profit and earnings, which gives us runway for a really good 2027

**Romaine Bostick** (1:31)
Talk to me a little bit about the domestic business. And, I mean, when I was looking at the share drop today, and we spoke to some analysts, Some people seem to raise some concerns here about the margins on the domestic business, why they weren't as strong as some folks were looking for, as well as the guidance going forward. Is that a reflection of what you've lost from the Amazon business, or is that more related to tariffs and other economic issues?

**Carol Tomé** (1:57)
Well, we were quite pleased with our margin performance in the domestic business in the second quarter. It was up 400 basis points from what we reported in the first quarter, and up 100 basis points year on year. If you look at the back half of the year, we guided to continued margin expansion year over year in both the third and fourth quarter, because we've added new productivity into our business to help lower the cost per piece, while leaning into the segments of the market that really value our end-to-end capabilities, like complex health care logistics and SMB and B2B.
And when you think about those segments, we saw good growth in the second quarter. Health care reported its second $3 billion quarter in a row. SMB volume in the United States was up over 4% year on year. And we're gaining share in industrial and automotive. So I'm super pleased about the progress that we're making and the results that we'll deliver.

**Romaine Bostick** (2:59)
I do want to talk about health care in a bit, but I'm just curious, though, on the domestic business, because I mean, there is a disparity between what we saw on the adjusted numbers and on the gap basis, which seems to suggest that some of the positive that we saw is coming from cost cuttings. But as we get into that second half of the year, and you could correct me if I'm wrong, you're saying US revenue per piece growth is going to be about 4 to 4.5% in the second half. That would be down sequentially from 9 plus percent that we saw in Q2. Average daily volume is also supposed to decrease, although I think either you or the CFO alluded that that was more seasonal factors. Just kind of square the circle as to why there seems to be some deceleration with regards to the US business.

**Carol Tomé** (3:40)
Yeah, happy to do so.
So first of all, on the volume side, Well, volume will be down year over year. That's a reflection of the Amazon glide down dynamic, because if you look at the third and fourth quarter of last year, we glided down volume in the first and second quarter of this year, so the year over year comparison makes the volume look negative. But if you ignore Amazon, we'll actually grow volume in our US business, just like we did in the second quarter, if you ignore Amazon. On the RPP differences, in the second quarter, we had strong RPP growth, driven by solid base rates, customer mix improvements, as well as fuel. And fuel was about half of that RPP growth in the second quarter. There's a lot of volatility in the fuel market, as you know.