The Ultimate Guide to Investing in UPS for Maximum Returns

Core Viewpoint - UPS presents a compelling value proposition based on management's guidance, indicating strong potential for growth and profitability, but the ability to meet these expectations remains uncertain until at least the second half of 2026 [1][2]. Financial Projections - Management's guidance for 2025 anticipates revenue of $89 billion and an adjusted operating profit margin of 10.8$5.7 billion in free cash flow (FCF) in 2025 [2]. - The stock currently trades at 14 times 2025 earnings and 16.6 times 2025 FCF, which are considered attractive multiples [2][3]. Strategic Restructuring - UPS plans to reduce its Amazon deliveries by 50% by the second half of 2026, as Amazon accounts for 11.8% of total revenue in 2024 [5]. - The company is transitioning SurePost deliveries in-house, moving away from the United States Postal Service (USPS) [5]. - This strategy aims to enhance profit margins by reducing lower-margin Amazon deliveries, similar to FedEx's previous actions [6]. Revenue and Earnings Outlook - Wall Street estimates that UPS's revenue in 2026 will be comparable to $91.1 billion in 2024, with earnings per share expected to rise from$7.72 in 2024 to $8.89 in 2026 [7]. Operational Challenges - UPS faces significant challenges in reconfiguring its network to align with new volume levels, as highlighted by CEO Carol Tomé's "Efficiency Reimagined" initiative, which aims for approximately$1 billion in savings [8]. - The CFO noted the need to adjust the fixed asset base, including buildings and vehicles, to match the anticipated changes in delivery volumes [8]. Monitoring Progress - Investors should focus on the U.S. domestic segment margin, which UPS expects to improve from 7.5% in 2024 to 8.8% in 2025, and reach 12% by the end of 2026 [10]. - Continuous growth in the U.S. domestic operating margin is anticipated in every quarter through 2025, with acceleration expected in 2026 [11].