Why UPS Stock Was Down 12.8% in Q1 as the S&P 500 Had Its Worst Quarter Since 2022

Core Viewpoint - UPS shares fell by 12.8% in Q1 2025 due to a disappointing Q4 earnings report and signs of a slowdown in end markets that may impact Q1 earnings [1] Group 1: Financial Performance - The fourth-quarter earnings report did not surprise investors, but UPS announced a significant reduction in Amazon delivery volume by 50% by H2 2026, which accounted for 11.8% of total revenue in 2024 [2] - UPS management aims to cut costs by $1 billion while focusing on higher-margin deliveries in the SMB and healthcare sectors [4] - Current free cash flow guidance of$5.7 billion does not fully cover capital return plans of $5.5 billion in dividends and$1 billion in stock buybacks for 2025 [7] Group 2: Business Strategy - Reducing Amazon delivery volume aligns with UPS' strategy to focus on more profitable delivery segments, as Amazon deliveries are often low-margin or loss-making [3][4] - Management's efforts to reconfigure the network for higher-margin deliveries may face challenges, especially given past difficulties in meeting guidance [5] Group 3: Market Conditions - Economic uncertainty due to tariff actions is contributing to a slowdown in growth, impacting UPS and its competitors [6] - FedEx's lowered revenue and earnings guidance due to weakness in the industrial economy has negatively affected UPS stock [6]