UPS Stock Before Q4 Earnings: Is It a Smart Buy or Risky Move?

Core Viewpoint - United Parcel Service (UPS) is expected to report a decline in both earnings per share (EPS) and revenues for the fourth quarter of 2025, with projected EPS of $2.23 and revenues of $24.01 billion, reflecting year-over-year decreases of 18.9% and 5.1% respectively [1][2][8] Financial Performance - The Zacks Consensus Estimate for UPS' revenues in 2025 is $88.05 billion, indicating a 3.3% year-over-year decline, while the EPS estimate for 2025 is $6.98, representing a decline of approximately 9.6% [2][4] - In the trailing four quarters, UPS has beaten earnings estimates three times, with an average surprise of 11.2% [4] Earnings Predictions - UPS has an Earnings ESP of +0.58% and a Zacks Rank of 3 (Hold), suggesting a potential earnings beat for the fourth quarter [5] - The company is expected to see total operating revenues decline by 5.4% year-over-year in the December quarter, with consolidated volumes projected to drop by 10.6% [6] Operational Factors - UPS is implementing a $1 billion cost-saving plan and focusing on small and medium-sized businesses (SMBs) to offset weak shipment trends and reduced volumes from Amazon [8][9][10] - The expiration of the De Minimis exemption is anticipated to negatively impact international segment volumes, particularly affecting the China-U.S. trade lane [7] Market Position - UPS shares have decreased by over 19% in the past year, underperforming both its industry and rival FedEx, which has shown better price performance [12] - UPS is trading at a discount based on the forward 12-month Price/Sales (P/S) ratio compared to the industry average, with FedEx being cheaper [14] Strategic Focus - The company is shifting its focus towards higher-margin areas such as SMBs and healthcare logistics, which contributed 32.8% to total U.S. volume in the September quarter, reflecting a 340-basis point year-over-year improvement [11] - UPS is also enhancing automation in sorting and operations and leveraging AI for logistics planning to improve efficiency [9] Long-term Outlook - Despite current challenges, UPS has the brand and network to generate steady cash flows in the long run, making it a compelling long-term player in the transportation sector [20]