UPS Margins Under Pressure: Is a Turnaround on the Cards?

Core Insights - United Parcel Service (UPS) is experiencing revenue weakness primarily due to weak demand driven by tariff-related uncertainties, high inflation, and geopolitical issues, with a 2.7% year-over-year revenue decline in the June quarter [1][9] Revenue and Operating Performance - In Q2 2025, UPS reported a consolidated operating margin of 8.8%, down from 9.5% a year ago, with average daily volume declining by 7.3% year over year [2][9] - UPS has not provided revenue or operating profit guidance for 2025 due to ongoing uncertainties [2] - Adjusted operating expenses are expected to decline by 2.7% year over year in 2025, while revenues are projected to decrease by 4.7% [4] Customer Relationship Impact - UPS has decided to reduce its business with Amazon by over 50% by June 2026, as Amazon was not considered a profitable customer [3][9] Competitive Landscape - FedEx, a competitor of UPS, is also facing weak demand and is implementing cost-cutting measures, anticipating $1 billion in permanent cost reductions for fiscal 2026 [5] Stock Performance and Valuation - UPS shares have declined over 30% this year, underperforming its industry [6] - The company trades at a 12-month forward price-to-earnings ratio of 11.81X, slightly below industrial averages [7] Earnings Estimates - The Zacks Consensus Estimate for UPS' earnings for Q3, Q4, full-year 2025, and full-year 2026 has been revised downward over the past 60 days [11]