Core Viewpoint - Multiple countries have suspended parcel shipments to the United States due to new U.S. customs policies, which are expected to create significant disruptions in international shipping [2][12]. Group 1: Countries Affected - France's postal service announced a suspension of parcel shipments to the U.S. starting August 25, except for private gifts valued under 100 euros [2]. - Nearly 20 countries, including Germany, Spain, Sweden, Norway, South Korea, and Japan, have also announced similar suspensions [2]. - In Asia, South Korea's postal service will stop accepting air parcels and some express services to the U.S., while Singapore Post will only allow non-declarable documents to be sent [4]. - Japan Post has also announced a suspension of services, pending further information [5]. - In Europe, the UK Royal Mail plans to pause shipments for one to two days to transition to a new system for collecting new tariffs [6]. Group 2: Policy Details and Implications - The new U.S. customs policy, effective August 29, will end the tax exemption for parcels valued at $800 or less, leading to increased costs for international shippers [2][14]. - DHL has joined the suspension of shipments due to unclear procedures regarding tariff collection and data submission requirements [12]. - The U.S. Customs and Border Protection (CBP) has outlined that imported goods will be subject to tariffs based on their country of origin, with a 15% tariff for packages from the EU [14]. - Carriers must provide detailed information about the parcels, including quantity, origin, and value, and must pay tariffs through a specific system [15]. Group 3: Market Reactions - Following the announcement of the new policies, DHL's stock price fell by over 2.4% [12]. - Conversely, shares of UPS and FedEx saw increases of 3.1% and 5.11%, respectively, as they are certified to collect and remit tariffs on behalf of international postal carriers [16][18].

Core Viewpoint - The company, United Parcel Service (UPS), is undergoing a significant business transformation while providing essential services to modern society [1]. Group 1: Business Performance and Market Conditions - During the pandemic, UPS experienced a temporary surge in demand for its package delivery services, leading to a spike in stock prices, which later fell as demand normalized [2][5]. - UPS stock is currently trading approximately 60% lower than its peak during the pandemic, returning to pre-pandemic levels despite a broader market recovery [5]. - The company is now viewed as a turnaround story, with ongoing updates to its operations causing investor concerns about future performance [6]. Group 2: Operational Changes and Financial Impact - UPS is in the process of updating its operating systems and streamlining operations, focusing on more profitable business segments, which incurs significant costs [8]. - In Q2, UPS reported after-tax transformation strategy costs of $57 million, impacting earnings by $0.04 per share, while revenue fell 2.7% year over year [9]. - Despite lower revenue, revenue per piece in the U.S. market increased by 5.5%, indicating a positive shift in customer and product mix [10]. Group 3: Long-term Outlook and Dividend Concerns - The package delivery business is expected to grow in importance, and UPS is making strides to enhance profitability through operational updates [11]. - The dividend yield of 7.4% is becoming less sustainable, with a payout ratio exceeding 100% in Q2, raising concerns about potential dividend cuts [12]. - For long-term investors, UPS presents a compelling turnaround opportunity, supported by a critical delivery business that is difficult to replicate [12].

Core Insights - United Parcel Service (UPS) continues to face significant challenges, with Q2 earnings leading to a sharp decline in stock price, reaching $84.28, following a weak recovery from April lows [1] Group 1: Company Performance - UPS experienced a weak bounce from its April low, contrasting with a strong rebound in the majority of other stocks [1] - The company's Q2 earnings report resulted in a further plunge in stock value, indicating ongoing struggles in performance [1] Group 2: Investment Perspective - The approach to investing in UPS is characterized by a long-term focus, emphasizing macro ideas through low-risk ETFs and CEFs [1]

Core Insights - United Parcel Service (UPS) and Expeditors International of Washington (EXPD) have both increased their dividends this year, demonstrating a commitment to shareholder returns despite economic uncertainties [1][3]. Dividend Analysis - UPS raised its quarterly cash dividend to $1.64 per share ($6.56 annualized) from $1.63 ($6.52 annualized) in February, while EXPD increased its quarterly semi-annual cash dividend by 5.5% from 73 cents to 77 cents in May, with a payout ratio of 25% and a five-year dividend growth rate of 8.4% [3][4]. - Concerns about the sustainability of UPS' dividends arise due to its elevated payout ratio, which indicates potential challenges in maintaining long-term dividend payments [4][6]. Financial Performance - UPS' free cash flow has declined from a peak of $9 billion in 2022, with projections indicating free cash flow of $6.3 billion at the end of 2024, barely covering its dividend payments of $5.4 billion [5][6]. - In contrast, EXPD's lower dividend payout ratio suggests a more sustainable dividend policy, alleviating concerns about its ability to maintain dividend payouts [6]. Price Performance Comparison - EXPD has shown resilience in the stock market, achieving an 8.3% year-to-date gain, while UPS has experienced a significant decline in stock price [8][10]. - UPS' poor performance is attributed to revenue weakness due to geopolitical uncertainties and high inflation affecting consumer sentiment [12]. Operational Metrics - EXPD's recent strength is linked to a 7% year-over-year increase in airfreight tonnage and ocean container volume, alongside effective cost-cutting measures [13]. - The Zacks Consensus Estimate for EXPD's 2025 sales indicates a slight increase of 0.3%, while UPS' 2025 sales estimate suggests a decrease of 3.9% [14][15]. Valuation Insights - EXPD is trading at a forward sales multiple of 1.54X, while UPS has a forward sales multiple of 0.84X, indicating that EXPD is perceived as more expensive [17]. - Despite both companies focusing on dividends, EXPD's lower payout ratio and better price performance suggest it may be a more attractive investment compared to UPS [18][19].

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **transportation industry**, specifically the impact of **US tariffs** on freight flows from **China to the USA** [1][2][5]. Core Observations - **Laden vessels** from China to the USA decreased by **8% sequentially** and **21% year-over-year (YoY)**, indicating a significant decline in shipping activity [1][5]. - The **Port of Los Angeles** is expected to see a **13% increase** in sequential imports, but a potential **12% decrease** is anticipated in the following weeks, reflecting volatility in shipping patterns [5][36]. - **Rail intermodal volumes** on the West Coast increased by **2% YoY**, suggesting a recovery in logistics as inventory levels normalize [5]. - **Container rates** have dropped by **8% sequentially** and are under pressure, down **70% YoY**, indicating a challenging pricing environment for shipping companies [5][32]. Tariff Impact and Future Projections - The uncertainty surrounding tariffs may lead shippers to delay orders, potentially resulting in a lackluster peak season for freight volumes and revenues [6]. - If consumer demand remains resilient, a **re-stock event** could occur in **2026**, benefiting freight flows and margins after a prolonged period of destocking [6]. - Goldman Sachs economists have reduced the recession forecast to **30%** and increased the GDP outlook for Q4 to **1.3%**, suggesting a more favorable economic environment for transportation [8]. Stock Recommendations - **Truckers** have been upgraded due to a reduced likelihood of recession and resilient consumer demand [8]. - **Freight forwarders** like **EXPD** and **CHRW** are expected to benefit from volatility and potential surges in demand due to tariff-related delays [8]. - **Parcel services** (UPS and FedEx) are also positioned to gain from increased demand for air freight during peak seasons [8]. - **Intermodal services** on the West Coast (UNP and JBHT) may benefit from increased imports, although challenges could arise in the second half of 2025 if demand does not recover [8]. Additional Insights - The **Logistics Managers Index** indicates that upstream inventories are expanding, while downstream retail inventories are contracting, reflecting differing dynamics in supply chain management [73]. - The **Supply Chain Congestion Tracker** shows a slight increase in congestion, indicating that fluidity levels are returning to pre-COVID baselines [52]. - **Air cargo rates** from Shanghai to LA increased by **18% month-over-month** in July, highlighting ongoing volatility in shipping costs [60]. Conclusion - The transportation industry is currently facing significant challenges due to tariff impacts and fluctuating demand. However, there are potential opportunities for recovery and growth in the coming years, particularly if consumer spending remains strong and inventory levels stabilize.

Core Viewpoint - Drexel Morgan & Co. has significantly increased its investment in United Parcel Service (UPS) by purchasing 100,000 shares, reflecting a bullish outlook on the company's future performance and dividend sustainability [2][3][8]. Investment Activity - The investment firm acquired 100,000 shares of UPS, with an estimated transaction value of approximately $9.86 million based on the average share price in Q2 2025 [2][3]. - Following this transaction, Drexel Morgan's total stake in UPS increased to 309,765 shares, valued at $27.08 million as of August 12, 2025 [2][3]. - UPS now constitutes 4.8% of Drexel Morgan's 13F reportable assets, which total $563.16 million as of the same date [3][4]. Company Performance - As of August 12, 2025, UPS shares were priced at $87.43, reflecting a decline of 29.4% over the past year, underperforming the S&P 500 by 47.2 percentage points [4]. - UPS has a market capitalization of $73.94 billion and reported revenue of $90.17 billion with a net income of $5.73 billion for the trailing twelve months (TTM) [5]. - The company offers a dividend yield of 7.48% as of August 12, 2025, with a forward P/E ratio of 11.91 [4][5]. Business Overview - UPS operates as a global leader in integrated freight and logistics, providing package delivery, transportation, logistics, and supply chain solutions across approximately 200 countries and territories [5][7]. - The company serves a diverse customer base, including individuals, small businesses, and large enterprises, with a focus on time-definite package delivery services and value-added logistics solutions [6][7]. Strategic Insights - Drexel Morgan's acquisition of UPS shares indicates a preference for large-capitalization, dividend-paying stocks, which aligns with its investment strategy [8]. - UPS's management has committed to significant capital allocation, including $1 billion for stock buybacks and $5.5 billion for dividends in 2025, amidst a challenging trading environment [9][10].

Group 1: Company Overview - UPS and Whirlpool are currently experiencing significant declines in their stock prices, with both down over 60% from their all-time highs [2] - Both companies have a history of paying and increasing dividends, with their yields now exceeding 7% due to share price slumps [4] Group 2: Dividend Analysis - UPS is committed to maintaining a stable and growing dividend, with expected payouts of at least $5.5 billion this year, likely exceeding its free cash flow [5] - Whirlpool has cut its annual dividend from $7 to $3.50 per share, resulting in a more sustainable yield of 4% compared to UPS's 7.5% [6] Group 3: Impact of Tariffs - UPS faces risks from tariffs that may lead to decreased shipping volumes and negatively impact consumer spending, especially during the holiday season [8] - Conversely, Whirlpool may benefit from tariffs on foreign competitors, as it manufactures over 80% of its products in the U.S., giving it a pricing advantage [9] Group 4: Investment Outlook - Despite UPS's higher yield, its future prospects appear dim due to external economic factors, while Whirlpool offers a decent yield and compelling valuation even after its dividend cut [10]

Group 1 - UPS has resolved several grievances and a local contract dispute, avoiding a major labor crisis and halting strikes in Kentucky and six other states [1][10] - The relationship between Teamsters and UPS remains strained, with allegations of UPS violating the National Master Agreement [2][4] - Teamsters are dissatisfied with UPS for not hiring the promised number of full-time employees and for offering buyout packages to reduce labor costs [3][4] Group 2 - UPS is lagging in delivering air-conditioned vehicles and creating new full-time jobs as per contractual obligations [4][10] - The company is streamlining its delivery network in response to lower parcel volumes and has decided to cut its business with Amazon by 50% by 2026 [5][10] - UPS shares have declined over 31% in the past year, underperforming its industry, and currently trades at a forward price-to-earnings ratio of 12.4X, which is considered expensive [8][9] Group 3 - The Zacks Consensus Estimate for UPS' earnings for 2025 and 2026 has been revised downward over the past 30 days [12] - Current earnings estimates for UPS are $6.58 for 2025 and $7.44 for 2026, down from previous estimates of $7.05 and $7.96 respectively [12] - UPS currently holds a Zacks Rank 4 (Sell) [12]

Shipping Data - Global container freight index CCFI reported at 1200.73 points, down 2.56% month-on-month[5] - Shanghai Container Freight Index (SCFI) at 1489.68 points, down 3.94% month-on-month[5] - Ningbo Container Freight Index (NCFI) at 1053.86 points, down 3.11% month-on-month[5] Air Freight Data - Global air cargo index BAI reported at 2071 points, up 2.17% month-on-month[5] - BAI30 at 3460 points, up 2.06% month-on-month[5] - BAI80 at 4455 points, up 0.84% month-on-month[5] Market Trends - SCFI has declined for nine consecutive weeks, with significant drops in the US West and East routes, at 9.8% and 10.7% respectively[19] - FedEx increased import handling fees from $1.5 to $2.5 per package, a 67% increase, effective August 18[13] - UPS will implement new dimensional weight pricing rules, tightening thresholds for additional fees[13] Cross-Border E-commerce Developments - Temu shifts focus to the European market as US tax policies impact growth, with GMV in Europe surpassing that in the US[15] - Trump plans to impose a 250% tariff on semiconductor and pharmaceutical products, potentially impacting trade dynamics[15]

PART I—FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for United Parcel Service, Inc. for the period ended June 30, 2025, including balance sheets, income statements, cash flows, and detailed notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased slightly to $70.92 billion by June 30, 2025, while total shareowners' equity decreased to $15.78 billion Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $18,850 | $19,310 | | **Property, Plant and Equipment, Net** | $37,711 | $37,179 | | **Goodwill** | $4,806 | $4,300 | | **Total Assets** | **$70,923** | **$70,070** | | **Total Current Liabilities** | $14,240 | $16,441 | | **Long-Term Debt and Finance Leases** | $23,820 | $19,446 | | **Total Liabilities** | $55,146 | $53,327 | | **Total Shareowners' Equity** | **$15,777** | **$16,743** | | **Total Liabilities and Shareowners' Equity** | **$70,923** | **$70,070** | [Statements of Consolidated Income](index=5&type=section&id=Statements%20of%20Consolidated%20Income) Q2 2025 revenue decreased to $21.22 billion, with net income declining to $1.28 billion, reflecting a similar trend for the six-month period Statements of Consolidated Income Highlights (in millions, except per share amounts) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $21,221 | $21,818 | $42,767 | $43,524 | | **Operating Profit** | $1,822 | $1,944 | $3,488 | $3,557 | | **Net Income** | $1,283 | $1,409 | $2,470 | $2,522 | | **Diluted EPS** | $1.51 | $1.65 | $2.91 | $2.94 | [Statements of Consolidated Cash Flows](index=6&type=section&id=Statements%20of%20Consolidated%20Cash%20Flows) Net cash from operating activities significantly decreased to $2.67 billion for the six months ended June 30, 2025, impacting the period's cash balance Consolidated Cash Flow Highlights - Six Months Ended June 30 (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash from operating activities** | $2,666 | $5,309 | | **Net cash (used in) from investing activities** | $(2,278) | $653 | | **Net cash used in financing activities** | $(519) | $(2,767) | | **Net Increase in Cash** | $82 | $3,113 | | **Cash, End of period** | $6,194 | $6,319 | [Notes to Unaudited, Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%2C%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on revenue recognition, debt, leases, employee benefits, goodwill, equity movements, and transformation costs [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=46&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, strategic initiatives, segment results, liquidity, and capital resources amidst a complex macroeconomic environment - The company is executing its **'Customer First, People Led and Innovation Driven' strategy**, focusing on healthcare, SMBs, and International markets[205](index=205&type=chunk) - A key strategic action is the planned volume reduction from its largest customer, expected to be **over 50% relative to 2024 by June 2026**, with the glide-down proceeding as planned[206](index=206&type=chunk) - The **'Network Reconfiguration and Efficiency Reimagined' programs** are expected to reduce the operational workforce by approximately **20,000 positions** and achieve **$3.5 billion in savings in 2025**[209](index=209&type=chunk)[210](index=210&type=chunk) Consolidated Results Highlights | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue (in millions) | $21,221 | $21,818 | (2.7)% | | Operating Profit (in millions) | $1,822 | $1,944 | (6.3)% | | Diluted EPS | $1.51 | $1.65 | (8.5)% | | Avg. Daily Package Volume (thousands) | 19,741 | 20,933 | (5.7)% | [Results of Operations - Segment Review](index=54&type=section&id=Results%20of%20Operations%20-%20Segment%20Review) Segment performance shows U.S. Domestic Package revenue decline, International Package revenue growth with margin pressure, and Supply Chain Solutions revenue decrease Segment Operating Profit (in millions) | Segment | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | **U.S. Domestic Package** | $916 | $988 | $1,895 | $1,821 | | **International Package** | $672 | $718 | $1,313 | $1,374 | | **Supply Chain Solutions** | $234 | $238 | $280 | $362 | [Liquidity and Capital Resources](index=70&type=section&id=Liquidity%20and%20Capital%20Resources) UPS held $6.3 billion in cash as of June 30, 2025, with net cash from operations decreasing due to higher pension contributions and working capital changes - Net cash from operating activities decreased by **$2.6 billion** in the first half of 2025, driven by higher pension contributions and unfavorable changes in working capital[309](index=309&type=chunk)[310](index=310&type=chunk) - Capital expenditures for the first half of 2025 were **$2.0 billion**, with the full-year forecast at approximately **$3.5 billion**[311](index=311&type=chunk)[315](index=315&type=chunk) - During the first six months of 2025, the company repurchased **8.6 million shares for $1.0 billion** and paid dividends of **$2.7 billion**[317](index=317&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=77&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market risks from commodity prices, foreign currency, and interest rates, with no material changes to its hedging strategies since year-end 2024 - Market risks, hedging strategies, and financial instrument positions as of June 30, 2025, have not materially changed from the 2024 year-end report[338](index=338&type=chunk) Net Fair Value of Derivative Financial Instruments (in millions) | Derivative Type | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Currency Derivatives | $(276) | $283 | [Item 4. Controls and Procedures](index=78&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of June 30, 2025, following the deployment of a new enterprise-wide general ledger system - Management concluded that disclosure controls and procedures were **effective** as of the end of the reporting period[343](index=343&type=chunk) - In April 2025, the company implemented a new enterprise-wide general ledger system, leading to changes in its internal control over financial reporting[344](index=344&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=79&type=section&id=Item%201.%20Legal%20Proceedings) Material legal proceedings, including wage-and-hour lawsuits and a Spanish investigation, are not expected to materially impact the company's financial condition - The company is involved in various judicial proceedings, including wage-and-hour lawsuits and an investigation in Spain, but does not believe any will have a material impact on its financial condition, results of operations, or liquidity[123](index=123&type=chunk)[125](index=125&type=chunk)[128](index=128&type=chunk) [Item 1A. Risk Factors](index=79&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the 2024 Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[349](index=349&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=80&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 8.6 million shares for $1.0 billion in Q1 2025, with $1.3 billion remaining under the share repurchase authorization - In Q1 2025, the company repurchased **8.6 million shares for $1.0 billion**. No repurchases were made in Q2 2025[350](index=350&type=chunk) - As of June 30, 2025, **$1.3 billion** remains available under the current share repurchase authorization[350](index=350&type=chunk)