UPS: A Turnaround, or Just Polishing Apples?

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For some time now, I’ve been suggesting that United Parcel Service might, shall we say, escape its current predicament. It’s a bit early to declare victory, naturally. One doesn’t boast of a successful swindle before the marks have counted their losses. However, a 25% uptick in the stock over four months? That’s enough to pique the interest of even the most cynical speculator – and believe me, I’ve known a few.

UPS recently unveiled its 2025 results – a curious blend of good, bad, and, dare I say, potentially great news. It’s a bit like inspecting a used automobile – you always find a few dents under the polish.

The Encouraging Signs

The most immediately gratifying news? They exceeded expectations. Wall Street, bless their predictable hearts, anticipated $24 billion in revenue. UPS delivered $24.5 billion. A modest triumph, perhaps, but a triumph nonetheless. Earnings per share clocked in at $2.38, comfortably ahead of the $2.20 consensus. The CEO, Ms. Tomé, spoke of “strong revenue quality.” A charming euphemism, wouldn’t you agree? It suggests they’re selling fewer packages, but charging more for each. A strategy I wholeheartedly endorse, naturally.

Apparently, their international small package business is thriving. Four years of peak performance in Q4. One begins to suspect a cleverly orchestrated scheme involving miniature, high-value goods. Or perhaps just a favorable exchange rate. The details, as always, are shrouded in the mists of accounting.

The volume of deliveries is down – a rather substantial 10.8% – but revenue per piece is up 8.3%. They’re focusing on quality over quantity. It’s a bit like a pickpocket shifting his attention from crowded markets to wealthy tourists. A far more efficient approach.

They’ve also made inroads with small- and medium-sized businesses – a record high, apparently. And B2B penetration is at a six-year peak. They’re clearly adept at cultivating the right clientele. Healthcare logistics, they claim, is a “robust growth area.” One imagines a network of discreet deliveries and inflated invoices. A perfectly legitimate business model, of course.

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The Shadows Lengthen

However, the market, that fickle beast, didn’t exactly celebrate. The share price dipped after the announcement. Investors, it seems, prefer a simple narrative – and a steady climb. They’re easily distracted by anything resembling complexity.

The first half of 2026, they predict, will be…challenging. Profits are expected to decline by around 30% in the first quarter. A “bathtub effect,” as Ms. Tomé elegantly puts it. Down in the first half, up in the second. A rather predictable cycle, really. One sees it everywhere – in the fortunes of cardsharps, the ebb and flow of the black market, and, of course, the quarterly earnings reports of publicly traded companies.

What’s behind this temporary downturn? Several factors, naturally. The decline in Amazon volume – a predictable consequence of their newfound independence – will sting. The transition back to the U.S. Postal Service will be costly. The retirement of their MD-11 fleet – a fleet of aging behemoths, I presume – will require a significant investment. And, of course, there are the tariffs. Always the tariffs. A convenient scapegoat for every financial misfortune.

A Glimmer of Opportunity

Now, for the genuinely interesting news. 2026, they claim, will be an inflection point. They’re no longer interested in simply moving boxes. They want to focus on higher-margin areas. A sensible ambition, naturally. One doesn’t build a fortune by catering to the masses. One caters to those who can afford to pay a premium.

The Amazon glide-down will be completed. Volume will decline, but costs will also come down. The network will become leaner, more agile. They’ll target more profitable shipments. A perfectly sound strategy. It’s a bit like a gambler shedding his losing bets and doubling down on the winners.

And for those of us who appreciate a generous dividend – a juicy 6.2% yield, in this case – the news is even better. The dividend, they assure us, is on firmer footing. They paid more in dividends than they generated in free cash flow last year, but that, they claim, will change. They project $6.5 billion in free cash flow in 2026, and plan to pay around $5.4 billion in dividends. A comfortable margin, naturally.

The voluntary driver separation program – a rather euphemistic term, wouldn’t you agree? – will also help. A one-time cost, they claim. But it positions them to generate higher free cash flow going forward. One suspects it also reduces their payroll. A win-win situation, naturally.

Some have suggested that UPS might cut its dividend. A preposterous notion. Based on the latest update, that scenario seems highly unlikely. And that, my friends, is truly great news. For income investors, at least. As for the rest of us? Well, we’ll simply have to wait and see if this turnaround is genuine, or just another cleverly disguised illusion.

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2026-01-29 11:02