By Lisa Baertlein
April 30 (Reuters) - United Parcel Service's efforts to grow its share of the lucrative prescription drugs delivery market appear poised to reap benefits in the second half of this year, even as the Iran war clouds the global economic outlook, CEO Carol Tome said in an interview.
That premium business, which can involve safe and speedy handling of temperature-sensitive medicines or radioactive treatments, is more recession-resistant than sectors like retail, housing or manufacturing,
she said. That's an important consideration as the U.S.-Israeli conflict with Iran threatens to spark a downturn that could deplete already soft demand for delivery services.
"There have been lots of challenges over the past several years - high inflation, contractions in markets - but healthcare continues to grow," Tome told Reuters this week. "I would argue that healthcare is pretty recession-proof."
Prescription drug shipments have been a pillar in UPS’ years-long turnaround plan as the company battles rival FedEx and reconfigures its network to handle fewer, but higher-profit deliveries.
DHL Group currently dominates the more than $80 billion outsourced healthcare logistics market that some analysts forecast will more than double in the next decade. But UPS is gaining ground against DHL and outpacing FedEx in several healthcare segments, analysts said.
HIGH MARGINS
Tome said UPS and others are targeting complex healthcare logistics because such specialized handling comes with high price tags and healthy profits.
For example, margins on shipments of very expensive medicines are in the mid-to-high-teen percentages, while e-commerce margins are in the very low single-digit percentages, Tome said.
That's already yielding benefits for the company, as traditional deliveries of lightweight packages for retailers like Amazon.com and Walmart become a drag on profits.
"We've just reported our first $3 billion healthcare revenue quarter in our company history and we've taken share in this space since 2021," Tome said.
UPS reported 2025 healthcare revenue of $11.2 billion, equal to almost 13% of its consolidated revenue. Healthcare accounted for more than 14% of UPS consolidated revenue in the first quarter of 2026.
As low-profit package volume drops off this year, higher-margin business will automatically become a bigger part of the pie. Lower operating costs then should amplify earnings growth, Tome said.
Asked about the impact of the Iran war, Tome said UPS's underlying business is holding up despite soaring fuel prices that are pinching consumer and corporate budgets due to the virtual closure of the Strait of Hormuz.
Meanwhile, analysts are watching the one part of the UPS healthcare business that is vulnerable to recession - home deliveries of GLP-1 weight-loss drugs that consumers, not insurers, pay for.
OUTSIDER
UPS lured Tome, a former Home Depot chief financial officer, out of retirement in June 2020, making her the first outsider CEO in the company's more than 100-year history.
Under her "better, not bigger" strategy, the world's biggest parcel delivery company has slashed Amazon's percentage of UPS business from a high of more than 13% to 8.8% in the latest quarter, while also funding acquisitions that expand its healthcare footprint.
The Atlanta-based company has been closing facilities and reducing its workforce, including union delivery drivers who can easily make more than $100,000 per year, to compensate for culling millions of Amazon packages.
It handed off its value-priced Ground Saver deliveries to the U.S. Postal Service as U.S. tariff policy choked off millions of low-value "de minimis" shipments from China-linked companies like Temu and Shein.
UPS has also been upgrading hubs with automation, package tracking technology and other tools that should make deliveries more cost-efficient.
Much of that work is nearing completion, saving UPS billions in operating costs and creating an inflection point for company profitability. Stifel analyst Bruce Chan summarized the progress in a client note titled: "Home Stretch: Heaviest Lift of Transformation Complete ... Now for the Benefits to Materialize."
(Reporting by Lisa Baertlein is Los Angeles; Editing by Richard Valdmanis and Bill Berkrot)
