Is UPS Stock a Buy Right Now?

Core Viewpoint - United Parcel Service (UPS) stock presents an intriguing investment opportunity with a low valuation of less than 13 times the Wall Street analyst consensus earnings estimate for 2025 and a high dividend yield of 7.7% [1] Group 1: Capital Allocation Strategy - UPS management plans to allocate $5.7 billion in free cash flow (FCF), with $5.5 billion designated for dividend payments and $1 billion for share buybacks [3] - CEO Carol Tomé reassured investors about the company's liquidity to pay dividends and mentioned potential debt financing for share buybacks, as the cost of debt was lower than the dividend yield at that time [4] - Management executed $1 billion in share buybacks in the first half of the year, despite the stock trading at significantly lower prices now [5] Group 2: Market Conditions and Operational Adjustments - The current trading environment is challenging, with deteriorating end markets and operational adjustments being made [6] - UPS is scaling back Amazon delivery volumes and transitioning final-mile delivery from USPS for SurePost packages in 2025, indicating a noisy operational year [7] - FCF in the first half of the year was only $742 million, a significant drop from $3.4 billion in the same period of 2024, raising concerns about meeting the full-year target of $5.7 billion [8]