Key Points UPS is reducing Amazon deliveries, which will lower volume but potentially boost profits. SMB market growth remains uncertain due to new tariffs and shifting supply chains. Dividend sustainability is in question, with a possible need for cash reserves or debt. 10 stocks we like better than United Parcel Service › The outlook for United Parcel Service (NYSE: UPS) is not straightforward. The company is set to see some major changes over the next year, but the real question for investors ...

Core Insights - United Parcel Service (UPS) reported better-than-expected results, indicating progress in its efforts to rebuild margins and stabilize volumes after a challenging year [1][2] - The company's shares rose 12.1% in premarket trading, reflecting positive investor sentiment following the earnings report [1] - UPS projected fourth-quarter revenue of approximately $24 billion, surpassing analysts' expectations of $23.8 billion [2] Financial Performance - UPS reported an adjusted profit of $1.74 per share for the three months ended September 30, exceeding analysts' average expectations of $1.30 [7] - The company achieved consolidated revenue of $21.41 billion, which was above the expected $20.83 billion [7] - The adjusted consolidated operating margin improved to 10%, up from 8.8% in the second quarter [7] Strategic Initiatives - UPS is focusing on rate hikes, cost cuts, and prioritizing high-margin shipments to stabilize its business ahead of the holiday season [3] - The company is reducing the number of packages delivered for its largest customer, Amazon.com, to enhance profit margins [4] - UPS is undergoing a significant overhaul aimed at cutting $3.5 billion in costs by 2025, which includes closing hundreds of facilities and reducing its workforce [6] Market Context - The peak holiday shipping season, which can see UPS's daily average volumes double, runs from November to the end of January [5] - UPS's performance is contrasted with FedEx, which has also been cutting costs to protect margins and recently reported quarterly results above expectations [6]

Core Viewpoint - United Parcel Service (UPS) stock has significantly declined in 2025, down approximately 30% year-to-date, underperforming the S&P 500 due to various challenges including the decision to cut Amazon deliveries and narrowing margins [1] Group 1: Company Strategy - UPS is implementing a cost reduction plan named "better, not bigger," which aims to save about $3.5 billion in 2025 by cutting jobs and closing warehouses [2] - The company is shifting focus from low-margin consumer packages to more profitable deliveries for healthcare companies and small businesses, which is expected to improve margins in the long run [2] - UPS is investing in automation and data analytics to enhance efficiency, reduce delivery times, and lower costs, despite a significant drop in operating margin since 2022 [3] Group 2: Market Conditions - Average daily package volume in the U.S. has decreased this year, contributing to tighter operating margins and creating uncertainty regarding future guidance for 2025 [4] - Tariff pressures have also impacted the company's performance, leading to a cautious outlook [5] Group 3: Investment Considerations - UPS shares are trading at around 14 times forward earnings estimates, suggesting they may not be extremely cheap, but could be undervalued if the cost reduction plan succeeds [6] - The stock currently offers a dividend yield of over 7%, which may attract investors looking for growth and income, although those seeking stability might prefer to wait for clearer signs of recovery [6]

Core Insights - United Parcel Service (UPS) has experienced a significant decline in stock value, but is implementing major changes aimed at long-term improvement [1][12] - The pandemic initially boosted UPS's business due to increased e-commerce, but the subsequent drop in demand led to a stock price crash [5][6] - UPS is undergoing painful short-term changes, including union negotiations and exiting less profitable business segments, which are expected to incur upfront costs [7][8] Business Changes - UPS is focusing on enhancing technology, which requires substantial capital investment but is anticipated to yield long-term benefits [9] - The company is reducing its relationship with Amazon, a major customer, to concentrate on more profitable business lines [11] - Despite current challenges, there are signs of progress, such as a 5.5% increase in profit per package in the U.S. business, indicating potential for a turnaround [14][15] Financial Performance - UPS's stock has lost nearly two-thirds of its value since the pandemic peak, and the dividend yield is currently high at 7.8% [12] - The dividend payout ratio is concerning at nearly 100%, suggesting a potential for future cuts as the company continues its overhaul [13]

Core Viewpoint - UPS' stock has experienced a significant decline of 60% from its 2022 highs, now trading below pre-pandemic levels, which is crucial for potential investors to consider [1][6]. Business Overview - UPS operates a complex logistics network that is difficult to replicate, evidenced by its continued partnership with Amazon despite Amazon's own delivery service investments [2][4]. - The core business of UPS revolves around package delivery, which encompasses pickup, routing, and delivery, each requiring substantial operational effort [3][4]. Market Dynamics - The demand for package delivery is expected to persist as long as people reside in different locations, indicating a stable long-term business model [2][6]. - The stock price decline is attributed to a post-pandemic adjustment after an initial surge in demand, which was overestimated by Wall Street [6][8]. Strategic Initiatives - UPS is actively modernizing its operations by investing in technology, closing older distribution centers, and refocusing on more profitable segments, including reducing its relationship with Amazon due to low-margin deliveries [7][8]. - These strategic changes have led to lower revenue and increased costs, raising concerns among investors despite the long-term benefits of modernization [8][9]. Dividend Considerations - The current dividend yield stands at 7.7%, which raises concerns about a potential dividend cut, especially as the payout ratio approaches 100% [9][10]. - Historically, the payout ratio has been in the 70% to 80% range, but the ongoing business overhaul may necessitate a reset of the dividend [10][12]. Long-term Investment Potential - UPS is viewed as a reliable long-term investment option, with the potential for increased profitability post-modernization, although caution is advised for those seeking stable dividends [11][12].

Core Insights - United Parcel Service, Inc. (UPS) is recognized as one of the best freight stocks to invest in, despite recent revenue declines and an adjusted EPS miss [1] - The company reported a 0.8% decline in revenue in the U.S. Domestic Segment and a 2.6% drop in the International Segment, with adjusted EPS of $1.55 falling short of the $1.57 analysts expected [2] - UPS's Director, Christiana Smith Shi, purchased 500 shares valued at $44,080, signaling confidence in the company amidst mixed analyst opinions [3] - The company has an upside potential of 17.59% and is supported by 53 hedge funds holding stakes, indicating strong institutional interest [4] - Founded in 1907 and headquartered in Georgia, UPS is one of the largest global logistics and package delivery companies, offering a wide range of services [5]

Core Insights - FedEx Corporation is a global delivery empire that facilitates the overnight shipment of packages across continents, playing a crucial role in various sectors including personal gifts and essential medical supplies [1] Company Overview - FedEx operates a vast logistics network that enables rapid delivery services, highlighting its significance in the global supply chain [1] Industry Context - The delivery and logistics industry is characterized by its ability to adapt to consumer demands for speed and reliability, with companies like FedEx at the forefront of this evolution [1]