Core Viewpoint - United Parcel Service (UPS) has seen its stock price decline over 30% year-to-date, but it remains an attractive option due to its high dividend yield and potential for profitability improvements through strategic changes and market expansions [1]. Group 1: Dividend - UPS offers a forward dividend yield of 7.57%, which is considered substantial and appealing to income investors [2]. - CEO Carol Tomé has expressed confidence in the sustainability of the dividend, citing strong free cash flow and a solid investment-grade balance sheet as backing [2]. - Management is committed to maintaining a stable and growing dividend, recognizing its importance to investors [2]. Group 2: Tariff Impact - UPS is currently facing challenges due to tariffs, with CEO Tomé stating that tariffs generally negatively impact trade [3]. - The average daily volume for UPS's most profitable trade lane between China and the U.S. decreased by 34.8% year-over-year in May and June, while volume from China to other global markets increased by 22.4% in Q2 [3]. - UPS has expanded its capacity in the India-to-Europe trade lane to accommodate rising demand [3]. Group 3: Amazon Business Adjustment - UPS has reduced its business with Amazon by 50%, which may lead to a more profitable business model in the long run [4]. - The company has initiated a voluntary separation program for full-time U.S. drivers, which is expected to result in significant cost reductions as higher-paid drivers leave [5]. - Despite the reduction, Amazon will remain a key customer, with the retained volumes generating higher profits than those being eliminated [6]. Group 4: Expansion into Higher-Profit Opportunities - UPS is focusing on expanding into healthcare logistics, which has a total addressable market of $82 billion, aiming to become the leading provider in this sector [7]. - The company already leads in radiopharmaceutical logistics and offers unique capabilities such as RFID tagging [8]. - UPS plans to acquire Andlauer Healthcare Group to enhance its cold chain and pharmaceutical transportation capabilities in the U.S. and Canada, while also serving small-to-medium-sized businesses (SMBs) that accounted for 32% of total U.S. volume in Q2 2025 [9]. Group 5: Investment Appeal - While growth investors may not find UPS attractive, income investors are likely to appreciate the high dividend yield [10]. - The stock is also appealing to value investors, trading at only 13.2 times forward earnings [10].

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)

Core Viewpoint - The market reacted negatively to UPS's weak second-quarter earnings report and the lack of updated guidance, resulting in a 14.6% decline in stock value in July [1][2]. Financial Performance - UPS missed earnings estimates for the second quarter and did not provide updated full-year guidance, which was previously withheld during the first-quarter earnings call in April [2]. - The company reported volume declines in its most profitable international trade lane, specifically from China to the U.S., and noted that small and medium-sized businesses (SMBs) are significantly affected by the ongoing tariff conflict [2][3]. Management Strategy - UPS is focusing on optimizing profitability by targeting higher-margin markets such as SMBs and healthcare, while avoiding lower-margin deliveries for Amazon [5]. - The company is investing in technology to create a "network of the future," which is expected to enhance productivity and allow for facility consolidation [5]. Capital Allocation - UPS's capital allocation strategy includes a $1 billion buyback program and a commitment to $5.5 billion in dividends, despite trailing-12-month free cash flow being only $3.7 billion [7][8]. - The annual dividend of $6.56 per share represents 99% of the Wall Street consensus estimate of $6.63 per share for full-year earnings per share, raising concerns about sustainability [8]. Market Sentiment - The market's lack of confidence in UPS is evident, as the stock's decline in July reflects broader concerns regarding the trading environment and management decisions [11].

Group 1 - The article highlights twelve actionable investment ideas on tickers with less coverage, referred to as "The Undercovered Dozen" [1] - Inclusion criteria for "undercovered" tickers include a market cap greater than $100 million, more than 800 symbol page views in the last 90 days on Seeking Alpha, and fewer than two articles published in the past 30 days [1] - The ideas presented can range from "boring" large caps to promising up-and-coming small caps [1]

Core Viewpoint - UPS is facing significant challenges with its earnings and dividend sustainability, raising concerns among investors about the future of its payouts and overall financial health [1][10]. Financial Performance - UPS reported Q2 earnings with domestic revenue declining by 0.8% to $14.1 billion, while international revenue increased by nearly 3% to $4.5 billion [4]. - The diluted earnings per share (EPS) for the recent quarter was $1.51, down from $1.65 a year ago, which raises concerns as the quarterly dividend is $1.64, indicating earnings are insufficient to support the current dividend [5]. Dividend Outlook - Management expects to make dividend payments of around $5.5 billion this year, suggesting the payout is currently safe, but it is subject to board approval [8]. - There is uncertainty regarding future profitability and revenue, leading to speculation that a dividend cut may be inevitable if business slows down further [10]. Market Environment - Recent changes in U.S. trade policy, including the suspension of duty-free de minimis exemptions, could negatively impact UPS's international business, which had shown growth in the last quarter [9]. - The overall macroeconomic environment remains uncertain, contributing to the lack of guidance from UPS regarding future financial performance [6][8]. Investment Considerations - Despite trading at a low valuation of 13 times trailing earnings, the potential for a dividend cut and ongoing tariff uncertainties make it difficult to be optimistic about UPS's stock in the near term [11][12].

Industry Overview - The industrial sector has significantly outperformed the broader S&P 500, achieving a 15% gain year-to-date, nearly double the index's return [1] - Analysts from FactSet project the industrial sector to lead in revenue growth through 2027 and rank second in EPS growth, indicating a robust outlook for the industry [2] Company Analysis: Archer Aviation - Archer Aviation is a California-based start-up focused on developing electric vertical takeoff and landing (eVTOL) aircraft, aiming to provide air taxi services to alleviate urban congestion [4] - The stock has surged over 150% in the past year, reflecting strong market optimism surrounding eVTOL technology [5] - In June, Archer raised $850 million following a government executive order promoting eVTOL aircraft, and has established partnerships with major companies like United Airlines and Stellantis [6] - Despite its potential, Archer is currently pre-revenue and unprofitable, facing challenges in regulatory compliance and execution to convert prototypes into profitable operations [7] - With a market cap of $6.8 billion and a reported order backlog of $6 billion, Archer's valuation suggests strong demand but relies on successful contract execution [8] Company Analysis: United Parcel Service (UPS) - UPS is currently facing economic challenges, with its stock down over 18% in 2025, underperforming the S&P 500's 8.3% gain [9] - The company is undergoing a $3.5 billion cost reduction initiative, which includes job cuts and facility closures, while also scaling back its relationship with Amazon to focus on higher-margin services [10] - In Q2 2025, UPS reported a consolidated operating profit of $1.7 billion, a 3.3% increase from the previous quarter, despite a slight revenue decline of 0.7% [11] - The stock is trading at 15 times trailing earnings, significantly below its historical average and the industrial sector's average of 28, with a 6.4% dividend yield providing additional appeal [12]

Core Viewpoint - United Parcel Service (UPS) presents a compelling opportunity for income investors despite its stock price decline of over 30% year-to-date, particularly due to its strong dividend yield and long-term growth prospects. Group 1: Dividend Sustainability - UPS maintains a forward dividend yield of 7.38%, which is considered "rock solid" by management, supported by solid free cash flow and a strong investment-grade balance sheet [2][3] - The company has sufficient financial flexibility to fund its dividend, and management is committed to maintaining a stable and growing dividend [3] Group 2: Temporary Headwinds - Current challenges facing UPS, such as low U.S. consumer sentiment, are expected to be temporary, as consumer sentiment does not remain low indefinitely [4] - The decline in consumer sentiment is attributed to uncertainties surrounding tariffs from the Trump administration, which led to a 34.8% drop in average daily volume from China to the U.S. in May and June [5] - Despite the challenges, UPS reported a 22.4% increase in volume between China and the rest of the world in Q2 [5] Group 3: Profitability Boost from Amazon Strategy - UPS' decision to reduce its shipment volume for Amazon by 50% is anticipated to enhance profitability in the long run [6] - The company is implementing a voluntary separation program for full-time U.S. drivers to address staffing attrition, which is expected to reduce costs significantly as longtime drivers retire [7] Group 4: Long-term Growth Prospects - UPS has strong long-term growth prospects, particularly in complex healthcare logistics, which represents an $82 billion addressable market [9] - The company aims to become the world's leading provider in complex healthcare logistics and is set to close a $1.6 billion acquisition of Andlauer Healthcare Group, enhancing its capabilities in the healthcare sector [10] - Small-to-medium-sized businesses (SMBs) are also a growth driver, contributing 32% of total U.S. volume in Q2, with SMB penetration increasing by 230 basis points [11]

Core Insights - United Parcel Service (UPS) shares fell 10.57% to $90.84 following an earnings miss and a year-over-year revenue decline in Q2 2025 [1][2] - Although revenues of $21.2 billion exceeded expectations, they still represented a 2.7% decline year over year [3][10] - The company did not provide full-year guidance due to ongoing macroeconomic uncertainties [1] Financial Performance - Q2 2025 earnings per share were $1.55, missing the Zacks Consensus Estimate by a penny and declining 13.4% year over year [3][10] - Average daily volumes declined 3.8% year over year in the first half of 2025, attributed to weak consumer sentiment and tariff impacts [11] Market Position - Year-to-date, UPS shares have dropped 28%, underperforming the Zacks Transportation—Air Freight and Cargo industry's 16% decline [5][8] - Over the past year, UPS shares have decreased over 30%, while its industry and FedEx have seen declines of 21% and 22%, respectively [8] Challenges Facing UPS - The company is experiencing a demand slowdown due to declining shipping demand and lackluster online sales [11][12] - Concerns about dividend sustainability arise from an elevated payout ratio of 84%, with free cash flow barely covering dividend payments [13][15] Strategic Moves - UPS plans to reduce its workforce by 20,000, approximately 4% of its global workforce, and shut down 73 facilities to streamline operations [19][21] - The company has also agreed to cut Amazon volumes by more than 50% by June 2026, as Amazon was not considered its most profitable customer [21] Valuation - UPS is currently trading at a forward P/E of 11.99, lower than the industry average of 13.2 and FedEx [17] Investment Outlook - Despite attractive valuation and expansion efforts, near-term risks such as tariff uncertainties and declining earnings estimates suggest that buying UPS stock may be premature [19][22]

Market Valuation - UPS's market valuation lead over FedEx has shrunk to the smallest ever [1] - UPS shares experienced a 29% plunge this year [1]

道琼斯工业指数下跌0.46%，标普500下跌0.30%，纳斯达克回落0.38%。下跌背后，几个重量级公司的 财报表现令人意外。联合健康集团发布的盈利预测低于市场预期，股价重挫7.5%，成为拖累道指的"重 灾区"；波音虽然亏损收窄，但未能赢得投资者信心，跌幅达4.4%。默克更是因延长对中国的HPV疫苗 出口暂停时间，收跌1.7%。这些公司属于传统的盈利支柱，一旦失速，市场信心便会迅速动摇。 短期调整或许只是风向的初步信号。在所有变量都未落定之前，市场将很难再现此前那种无惧利空的单 边上涨。投资者或许需要重新思考，涨势背后是否已埋下过热的隐忧。 DLSMARKETS认为财报不佳固然构成直接冲击，但市场真正纠结的，还是即将公布的美联储政策声 明。通胀路径、就业数据与增长预期之间的微妙平衡，让货币政策走向充满不确定性。投资者一方面希 望看到美联储继续"鸽派"维稳，另一方面又担心经济可能没有市场想象中强韧。一旦表态偏"鹰"，资金 可能重新定价风险资产。 周二，美国三大股指集体回落，市场情绪出现微妙转变。虽然此前标普500和纳斯达克指数不断刷新纪 录高位，但本轮调整暴露出投资者对盈利质量和政策前景的双重担忧。财报季如期而 ...