UPS Q2'26 Conference Call Notes

3 things from United Parcel Service's call, starting with: RFID is the sleeper: UPS quietly transformed from a scanning network to a sensing network, eliminating hundreds of millions of manual scans

Three things that matter from United Parcel Service (UPS) in its Q2’26 call:

1. RFID is the sleeper: UPS quietly transformed from a scanning network to a sensing network, eliminating hundreds of millions of manual scans: RFID deployment across all U.S. facilities now covers 2.2 million pieces daily at origin, creating unbreakable customer stickiness with zero churn where deployed. Management: ‘Where we have RFID at the point of origin, we have seen no churn.’

2. Amazon glide-down ‘success’ masks a brutal reality: U.S. domestic margins at 8% are still below pre-pandemic levels despite removing $4.5B in costs: The market celebrates completion but misses that incremental volume economics are only ‘materially better’ not transformative, and full-year margin guide of 7.5% implies back-half margins barely crack 8.8%.

3. International is hemorrhaging: Margins collapsed from 18% historical to 12.4% with management now targeting only ‘mid-teens’: Management buried the lede that they added block hours and leased aircraft for Middle East rerouting while Asia margins dropped 500 basis points, yet they’re guiding to margin recovery without China volume recovery.

Disclosure Quality: B+ | Financial Quality: B

Track UPS’s promise history and grade trend: callsheetdaily.com/tickers/ups

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Delta Sheet

• ▲ Consolidated Revenue: $21.2B (-2.3% YoY) → $22.8B (+7.6% YoY) (+990 bps YoY acceleration)

• ▲ Consolidated Operating Profit: $1.3B → $2.1B (+12% YoY) (+$800M sequential surge)

• ▲ Consolidated Operating Margin: 6.2% → 9.2% (+300 bps sequential expansion)

• ▲ U.S. Domestic Revenue: $14.1B (-2.3% YoY) → $14.9B (+6% YoY) (+830 bps YoY acceleration)

• - U.S. Domestic Operating Margin: 4.0% → 8.0% (+400 bps sequential, but guide implies deceleration)

• ▲ U.S. Average Daily Volume: -8.0% YoY → -3.3% YoY (Volume declines moderating)

• ▲ Revenue Per Piece Growth: +6.5% YoY → +9.3% YoY (+280 bps acceleration)

• - SMB % of U.S. Volume: 34.5% (highest ever) → 34.5% (Plateaued at record high)

• ▲ International Revenue: $4.5B (+3.8% YoY) → $5.0B (+12.5% YoY) (+870 bps YoY acceleration)

• ▼ International Operating Margin: 12.1% → 12.4% (Stuck in low-teens vs 18% historical)

• ▲ Healthcare Revenue: $3.0B+ (first ever) → $3.0B+ (second consecutive) (Maintaining $3B quarterly run rate)

• ▲ DAP Revenue: $1.2B → $1.4B (Third consecutive $1B+ quarter)

• ▼ Amazon % of Revenue: 8.8% → 9.0% (Slight uptick despite glide-down)

• ▼ Cash From Operations YTD: $2.2B (Q1 only) → $3.1B YTD (Only $900M added in Q2)

• - Free Cash Flow YTD: Not disclosed → $1.6B YTD (Includes Driver Choice payments)