How Should Investors Play UPS Stock Amid Tariff Risks?

Core Viewpoint - United Parcel Service (UPS) is facing significant challenges including tariff-induced economic uncertainty, inflation, supply-chain disruptions, weak freight demand, and geopolitical changes [1][2][3] Economic and Trade Environment - The current U.S. administration is adopting protectionist measures that restrict international trade, impacting major trading partners like Canada, Mexico, and China [2] - Trade tensions are escalating due to retaliatory tariffs, contributing to market volatility and fears of an economic slowdown [3] Company Performance and Outlook - Analysts have turned bearish on UPS, with earnings per share estimates declining for the first and second quarters of 2025 and for the full years 2025 and 2026 [4] - UPS shares have declined by 23% over the past year, underperforming compared to the Zacks Transportation—Air Freight and Cargo industry and rival FedEx [5] Dividend Policy - UPS announced a 0.6% increase in its quarterly dividend, raising it to $1.64 per share, but concerns about the sustainability of this dividend arise due to a high payout ratio of 84$9 billion in 2022, with projections of $5.7 billion for 2025, which is only slightly above expected dividend payments of$5.5 billion [10][11] Revenue Projections - UPS anticipates an 8.5% decrease in average daily volumes for 2025 compared to 2024, driven by a slowdown in online sales and global manufacturing activity [12] - The company expects consolidated revenues of $89 billion for 2025, significantly below the Zacks Consensus Estimate of$94.6 billion [13] Valuation Concerns - UPS stock is considered expensive, trading at a forward sales multiple of 1.14, which is higher than its peer group [16] - The company's current valuation and near-term risks, including tariff-related uncertainties and dividend sustainability, suggest that buying the stock may be premature [17]