Buy, Sell, Or Hold UPS Stock At $115?

Core Viewpoint - UPS reported Q4 results with revenues missing expectations but earnings exceeding estimates, leading to a significant stock drop due to a disappointing outlook [1][5]. Financial Performance - UPS's Q4 revenue was $25.3 billion, a 1.5% year-over-year increase, while adjusted earnings per share (EPS) rose 11% year-over-year to $2.75 [3][4]. - The Supply Chain Solutions segment saw a 9.1% decline in sales, while U.S. Domestic Package sales increased by 2.2% and International sales rose by 6.9% [3]. - The average daily package volume in the U.S. Domestic segment declined by 0.3%, but international volume increased by 8.8% year-over-year [3]. Outlook and Strategic Decisions - UPS plans to reduce its shipping volumes with Amazon by over 50% by the second half of 2026, which is expected to impact future sales negatively [1][4]. - The company anticipates 2025 sales to be around $89 billion, significantly lower than the $95 billion consensus estimate, but aims for an operating margin expansion to 10.8% [4]. Stock Performance - UPS stock has underperformed, with an 11% decline since the beginning of 2024, compared to a 27% increase in the S&P 500 index [2]. - Over the past four years, UPS stock returns have been inconsistent, with a 30% return in 2021, followed by declines of -15% in 2022, -6% in 2023, and -16% in 2024 [5]. Valuation and Investment Perspective - Currently trading at under 15 times trailing earnings, UPS's valuation is below its average P/E ratio of 17 times over the last five years, suggesting potential for growth despite the reduced sales outlook [7]. - The improvement in profitability is expected to support long-term earnings growth, making UPS stock an attractive option for investors seeking robust long-term gains [7].