United Parcel Service Stock: Bull vs. Bear

Key Points

• Through the first half of 2025, management's cost-savings initiative is bearing fruit.

• Management's capital allocation strategy might need revisiting, particularly as it navigates challenging end market conditions.

• 10 stocks we like better than United Parcel Service ›

After plunging more than 33% since the start of the year (as of this writing), shares of United Parcel Service (NYSE: UPS) have failed to deliver for investors in 2025.

But does this disappointing performance mean the stock should be completely forsaken, or is there a buying opportunity presenting itself? Let's see how two Fool.com contributors tackle this question.

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Image source: Getty Images.

Things may be rough now, but that doesn't mean they won't smooth out in the future

Scott Levine: There's no denying that UPS is enduring a difficult environment right now. In the second quarter of 2025, UPS recognized a slowdown in manufacturing activity and customer buying as two factors pressuring the business domestically, while tariff uncertainty is affecting international business. That's not to mention the effect of the reduction in business from Amazon.

But challenges in the present aren't a guarantee of failure to grow in the future.

For all UPS' current woes, it's important to remember the company's leadership position in the logistics industry. Developing the infrastructure that facilitates complex logistics doesn't occur overnight, and the company's important role in supporting the global supply chain contributes to its competitive advantage.

Taking action to better position the company for future growth, management implemented a cost-savings initiative that is expected to result in a $3.5 billion reduction in expenses due to its network reconfiguration and Efficiency Reimagined initiatives in 2025. The initiative is already bearing fruit. In Q2 2025, UPS reported an operating margin of 8.6%, an expansion from the 7.7% operating margin it reported in first-quarter 2025. Management projects that the the operating margin will widen even further throughout the year, resulting in the company generating a 9% operating margin for fiscal 2025.

With shares of UPS trading at 7.9 times operating cash flow -- a discount to their five-year average cash flow multiple of 11.5 -- investors now have a great opportunity to pay a bargain-bin price for an industry leader.

UPS needs a reset of expectations

Lee Samaha: Despite UPS having good long-term growth prospects from its underlying shift toward higher-margin small and medium-sized business (SMB) and healthcare deliveries, and its substantive productivity-enhancing investments in the "network of the future," the near- to medium-term outlook is challenging. The evolving tariff environment is generating more questions than answers for many of its SMB customers that import products, notably from China.

In addition, there are question marks surrounding management's strategy. This includes spending $5.5 billion on maintaining a dividend and buying back stock to the tune of $1 billion in the first half, despite Q2 seeing a cash outflow of $736 million, and management being unable to give full-year guidance.

With the tariff environment remaining similar to that of the second quarter, it's hard to argue that management's refusal to update guidance, in light of increased uncertainty, is due to the risk of a positive surprise.

Thinking longer-term, there are plenty of reasons to be positive. But right now, the company needs a reset of expectations, and that might not come before further disappointments are in store. Moreover, there's no guarantee that management will take such actions, not least because CEO Carol Tome even mentioned that she was considering debt financing share buybacks during the first-quarter earnings call.

UPS will surely see better days, but investors should wait for the reset first.

Should you buy UPS stock now?

Whether you pride yourself on being a contrarian investor or you fancy yourself a value investor, UPS stock will appeal to your sensibilities right now. Of course, the company's ability to execute its cost-savings initiative is not guaranteed, and there's a fair degree of risk with buying UPS stock today. More cautious investors may want to see the company produce improved financial results before clicking the buy button.

Should you invest $1,000 in United Parcel Service right now?

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Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and United Parcel Service. The Motley Fool has a disclosure policy.