Anthony Schiavone

Fully caffeinated, Tim.

Feeling good.

Tim, I think it's fair to say that UPS is firmly in a turnaround.

But this quarter, I think investors finally received some hope that this turnaround is in the early stages of turning.

Revenue declined nearly 4% year-over-year.

Admittedly, that does not sound great.

But to put some context around that, the decline was primarily driven by the planned decrease in Amazon package volume that it delivers, as well as some business divestitures.

So just looking at UPS's domestic business in the U.S., and I think this is really interesting, revenue declined nearly 3%, but volumes declined by 12%.

So that tells me that UPS is shedding lower-margin Amazon e-commerce volume, and instead focusing on higher-margin volumes in healthcare, business-to-business, and international markets.

The result of that is that the revenue per piece, which is a key metric they track, grew 10%.

That's the fastest growth rate they've had in three years.

Their domestic operating margin actually expanded slightly, even though the volumes fell 12%.

I think that's a really good sign that management's better-not-bigger strategy is progressing.

On the expense side, with the glide down of those Amazon volumes, UPS expects to reduce expenses by $3.5 billion this year.

And with that lower volume, UPS needs fewer trailers, they need fewer trucks, fewer aircrafts, doesn't need as many buildings.

And unfortunately, it also means they need fewer employees, too.

But all these decisions are aimed towards becoming a smaller, more efficient UPS.

And I really think this quarter was a big step in the right direction for the company.

I was hoping the beginning of the profitability improvement would have occurred two years ago, because this plan has been in place for a while now.

There's been a lot of volatility around UPS's quarterly earnings with their labor contract tariffs and all that.