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 beat analysts' estimates for third-quarter profit and forecast revenue above Wall Street expectations for the holiday season on Tuesday, banking on price increases to offset soft business-to-business demand in the U.S.

Shares of the company rose 8.9% in premarket trading, with rival FedEx also gaining 2.5%. UPS shares are down about 28% since the start of the year.

The forecast and the profit beat signal early progress in UPS' efforts to rebuild margins and stabilize volumes after a bruising year marked by tariff-related volume slump, the end of "de minimis" exemptions and rising costs.

The company projected revenue to be about $24 billion for the fourth quarter. Analysts on average were expecting quarterly revenue of $23.8 billion, according to data compiled by LSEG.

"The reintroduction of a 4Q guide, and one that points to upside to consensus, will likely add to the covering event today," said Evercore ISI analyst Jonathan Chappell, adding that expectations were "very low" coming into the print.

The world's biggest parcel delivery firm is now leaning on rate hikes, cost cuts and a sharper focus on high-margin shipments to steady its business ahead of the crucial holiday season.

The company has accelerated efforts to reduce the number of packages it delivers for its top customer, Amazon.com, to boost its profit margins.

The small package delivery business that UPS dominates is also under pressure from frozen corporate decision-making and subdued consumer sentiment as they adapt to the economic fallout from President Donald Trump's changing trade policies.

The peak holiday shipping and return season, when UPS daily average volumes can double, spans from November to the end of January.

LEASH ON COSTS

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 aimed at reducing $3.5 billion in costs in 2025.

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

Atlanta-based UPS reported consolidated revenue of $21.41 billion, above expectations of $20.83 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.

The company 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 Sriraj Kalluvila)