Is It Finally Time to Give Up on UPS After the High-Yield Dividend Stock Crashed to a 4-Year Low?

Core Viewpoint - United Parcel Service (UPS) has faced significant challenges leading to disappointing fourth-quarter and full-year 2024 results, resulting in a 14.1% drop in stock price and raising concerns about the sustainability of its high dividend yield of 5.9% [1][12]. Group 1: Financial Performance - UPS reported a mere 0.1% revenue growth in 2024, with operating margins declining and adjusted diluted earnings per share falling by 12.1%, indicating a negative trend that jeopardizes future targets [6]. - The company has adjusted its 2026 forecast for U.S. small package average delivery volume down to 98 million packages from an earlier estimate of 108 million, reflecting a more conservative growth outlook of 5.5% compound annual growth rate between 2023 and 2026 [5]. Group 2: Strategic Decisions - UPS plans to cut its Amazon volumes by 50% by the second half of 2026, a move aimed at improving margins despite the potential negative impact on revenue, as Amazon is its largest but not most profitable customer [7][8]. - The management's decision to reassess its relationship with Amazon comes after nearly 30 years of partnership, indicating a strategic shift to prioritize profitability over volume [7]. Group 3: Market Position and Outlook - The stock is currently at its lowest level since July 2020, and while it may appear undervalued with a price-to-earnings ratio of 16.4, the company’s ongoing challenges suggest that a turnaround may take several years [10][12]. - UPS is guiding for revenue of $89 billion and operating margins of 10.8% in 2025, which, while an improvement from 2024, still reflects a cautious outlook for the near term [9].