Here's Why UPS Stock Slumped in July

Core Viewpoint - The market reacted negatively to UPS's weak second-quarter earnings report and the lack of updated guidance, resulting in a 14.6% decline in stock value in July [1][2]. Financial Performance - UPS missed earnings estimates for the second quarter and did not provide updated full-year guidance, which was previously withheld during the first-quarter earnings call in April [2]. - The company reported volume declines in its most profitable international trade lane, specifically from China to the U.S., and noted that small and medium-sized businesses (SMBs) are significantly affected by the ongoing tariff conflict [2][3]. Management Strategy - UPS is focusing on optimizing profitability by targeting higher-margin markets such as SMBs and healthcare, while avoiding lower-margin deliveries for Amazon [5]. - The company is investing in technology to create a "network of the future," which is expected to enhance productivity and allow for facility consolidation [5]. Capital Allocation - UPS's capital allocation strategy includes a $1 billion buyback program and a commitment to $5.5 billion in dividends, despite trailing-12-month free cash flow being only $3.7 billion [7][8]. - The annual dividend of $6.56 per share represents 99% of the Wall Street consensus estimate of $6.63 per share for full-year earnings per share, raising concerns about sustainability [8]. Market Sentiment - The market's lack of confidence in UPS is evident, as the stock's decline in July reflects broader concerns regarding the trading environment and management decisions [11].