UPS CEO Carol Tomé says volume growth with cost per piece rising slower than revenue per piece will expand profit margins in 2027.
Healthcare revenue, under $6bn when Tomé arrived, is expected to exceed $13bn by the end of 2026.
Tomé says she has no desire to automate drivers, even as automation becomes a key issue ahead of the 2028 Teamsters contract.
UPS CEO Says Healthcare and Cost Discipline Drive Her Turnaround
UPS says it has stopped chasing volume for its own sake and is building a smaller, more profitable business around premium freight, led by complex healthcare. Margin growth now depends on keeping cost per piece below revenue per piece, while fuel and transportation costs push the other way. The next big test is labor, because automation will be central to Teamsters talks before the contract expires in 2028.
Takeaways
2027 profit hinges on cost per piece. Daily volume should rise about 25% from the third to fourth quarter. Margins expand if cost per piece grows slower than revenue per piece. Bostick cites a 60 basis point gap, and Tomé holds to 50 to 100, blaming fuel and purchased transportation.
Healthcare is the core growth engine. Healthcare revenue was under $6bn when Tomé arrived and should exceed $13bn by the end of 2026, with margins in the low to mid teens. UPS targets a $90bn market, backed by pandemic cold chain work and GLP-1 shipping.
UPS now chases premium freight, not volume. Tomé says not all packages are equal. The plan to shrink Amazon is largely complete, and she sizes the factory-floor-to-front-door market at $923bn, with $535bn of it premium globally. Supply chain solutions grew 18% last quarter.
Data centers add a new logistics lane. Forwarding and logistics grew 17%, driven by premium healthcare and data center construction. Tomé puts the data center logistics opportunity above $15bn and sees no build-out delays, though she calls the business early.
Teamsters talks in 2028 will center on automation. Building staff is mostly part-time, so automation can be absorbed through turnover, and Tomé does not want to automate drivers. The contract expires August 1, 2028, with no mechanism for early talks. She promises a clearer desired outcome than in 2023.
Leadership was reshaped, but no successor named. UPS reorganized around international healthcare, the U.S., global operations and commercial strategy. Nando Cesarone now standardizes global operations and service agreements. Tomé says succession planning is under way and she is committed to seeing the turnaround through.
Trade slowdown looks cyclical, not structural. Inbound U.S. volume turned positive by quarter end and Asia to Asia lanes grew over 8%. Europe's July end of the de minimis exemption hurt volumes, and Canada was soft. Tomé links UPS's smaller footprint to her Home Depot crisis experience.
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