United Parcel Service, Inc. (UPS) 2Q26: Solid beat as domestic delivers – enough progress on cost to underwrite 2H?

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United Parcel Service, Inc. (UPS) 2Q26: Solid beat as domestic delivers – enough progress on cost to underwrite 2H?

David Vernon +1 917 344 8333 david.vernon@bernsteinsg.com 28 July 2026

(Exhibit 4). The current implied adj. op margin guide of 9.5% is slightly lower than the prior 9.6% and in-line with expectations, but that’s

on a more robust top line, driving a 1% guide-up on adj. op income vs. the street and a and adj. diluted EPS guide of $7.22 that lands 1.5%

ahead of the consensus estimate of $7.11 (Exhibit 4). The guidance points to 2H26 adj. diluted EPS totaling $4.39, about 50bps ahead

of the street’s $4.37 (based on $7.11 FY26 cons. estimate and 1Q actual + 2Q cons. estimate), but actually 50bps below if you just use

quarterly consensus estimates to determine the back half sum ($4.41). In other words, FY estimates might shift slightly — and we suspect in

the upward direction on the 2Q beat and healthier top line sentiment — but probably not very much.

ADV in Domestic was strong compared to street expectations (+2%) while International came in a bit light (-2%), but on the pricing front,

both Domestic and International delivered aggregate RPP beats (+1% and +9% vs. consensus, respectively) on better-than-expected

performance in every sub-segment (Exhibit 2). Domestic ADV beat was heavily driven by strength in Next Day Air (+5% vs. estimates), while

the biggest Domestic RPP surprises came from Next Day Air and Deferred (both delivered 2% beats vs. consensus), and the important

Ground segment (large portion of volume) also came in with a positive surprise of ~50bps. In International, the Domestic sub-segment was

a particular ADV drag, down 7.5% YoY and missing estimates by ~3.5%, but pricing was solid in International, particularly in the Export sub-