UPS (UPS 1.34%), that most venerable of shipping couriers, once graced the pantheon of blue-chip stocks with the elegance of a well-timed waltz. Its shares, in a moment of particular exuberance, reached $192.88 on Feb. 2, 2022-a 286% leap from its IPO price of $50 in 1999. Now, however, it trades at approximately $107, a rather ungraceful tumble, if one might say so.
The company’s stock, much like a gentleman caught in a downpour without an umbrella, has stumbled over the past four years as its growth slowed and margins shrank. Will this out-of-favor stock ever regain its former glory, or shall it descend further into the mire? A most vexing question, to be sure.
What happened to UPS over the past five years?
From 2019 to 2021, UPS’s average daily package volume increased from 21.88 million to 25.25 million, and its average revenue per package rose from $10.87 to $12.32. Total revenue leapt from $74.09 billion to $97.29 billion, adjusted operating margin expanded from 11% to 13.5%, and diluted EPS nearly doubled from $7.53 to $14.68. A most impressive array of figures, one might say, akin to a well-stocked larder at a grand feast.
That robust growth, fueled by surging e-commerce sales during the pandemic, propelled UPS’s stock to its record high in early 2022. Yet, over the following four years, its average daily package volumes declined, total revenue dropped, adjusted operating margins contracted, and diluted EPS plummeted. It partly offset this by raising fees and reducing lower-margin orders from its top customer, Amazon (AMZN 1.60%), which boosted its average revenue per piece but reduced total volumes. A dashedly clever bit of code, what!
| Metric | 2021 | 2022 | 2023 | 2024 | 9M 2025 |
|---|---|---|---|---|---|
| Average Daily Package Volume | 25.25M | 24.29M | 22.29M | 22.42M | 19.97M |
| Average Revenue Per Piece | $12.32 | $13.38 | $13.62 | $13.60 | $14.46 |
| Total Revenue | $97.29B | $100.34B | $90.96B | $91.07B | $64.18B |
| Adjusted Operating Margin | 13.5% | 13.8% | 10.9% | 9.8% | 6.8% |
| Diluted EPS | $14.68 | $13.20 | $7.80 | $6.75 | $4.46 |
UPS’s shipments slowed after the pandemic’s curtain fell. In 2022 and 2023, rising inflation exacerbated this, curbing consumer spending and boosting fuel and labor costs. The threat of a Teamsters Union strike prompted many customers to shift deliveries to FedEx (FDX 0.72%) and other services, much to the dismay of UPS’s board.
In 2024, UPS signed a new contract with the Teamsters to avoid a strike, and its shipments stabilized in a warmer macro environment. Unfortunately, the higher labor and pension costs guaranteed by that agreement-along with its divestment of Coyote Logistics, ongoing digital investments, regulatory fines, and impairment charges-crushed its margins. A most lamentable turn of events, if one might say so.
In 2025, its shipments fell again as it continued to reduce lower-margin orders and decouple from Amazon. To cushion this blow, it’s pursuing higher-margin orders from healthcare and SMB customers. It’s also trimming its workforce and automating tasks, but the competitive pressure from other couriers and new logistics investments offset these gains, resulting in reduced operating margins. A most perplexing conundrum.
What’s next for UPS?
UPS expects to gradually right-size its business with those strategies in 2025 and 2026. Unfortunately, the Federal Aviation Administration (FAA) grounded all of its MD-11 aircraft (about 9% of its entire fleet) indefinitely after a deadly crash in Louisville, Kentucky, last November. A most unfortunate incident, akin to a gentleman’s hat being snatched by a mischievous breeze.
That grounding, occurring during its peak holiday season, strained UPS’s logistics network and forced rerouting through other aircraft, trucks, and partner carriers. That pressure will likely compress near-term operating margins, but we won’t gauge the full impact until its fourth-quarter and full-year earnings report on Jan. 27. A most anticipated event, if one might say so.
For now, analysts expect UPS’s revenue and EPS to decline by 3% each in 2025. For 2026, they anticipate revenue to roughly flatline as margin-boosting initiatives boost EPS by 7%. A murky outlook, to be sure, but not without hope.
That murky outlook suggests UPS isn’t out of the woods yet. At $107 per share, it might seem a bargain at 15 times this year’s earnings-but it also doesn’t deserve a higher valuation. UPS isn’t down for the count, but its stock won’t recover and set fresh highs unless it successfully diversifies away from Amazon, expands higher-margin segments, and resolves logistics issues related to the MD-11 grounding. A most arduous task, but not insurmountable.
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2026-01-14 01:33