Should Investors Bet on UPS Post Its Andlauer Healthcare Buyout?

United Parcel Service UPS recently completed the acquisition of Canadian supply-chain company Andlauer Healthcare Group for $1.6 billion (C$2.2 billion). The transaction value of the deal implies that each shareholder of the Canadian company received C$55.00 per share in cash.

In April, UPS had inked the deal to acquire the Canadian company. The completion of the acquisition strengthens UPS’ foothold in the complex healthcare logistics space. By integrating the Canadian company’s specialized cold-chain network and expertise, UPS Healthcare customers can benefit from shorter transit times, improved end-to-end visibility, expanded global reach and superior quality assurance standards.

The major acquisition comes close on the heels of UPS’ third-quarter 2025 results, where it reported better-than-expected earnings per share and revenues.

Let's Have a Closer Look at UPS’ Q3 Earnings Report

UPS’ earnings per share (excluding 19 cents from non-recurring items) of $1.74 beat the Zacks Consensus Estimate of $1.31 but declined 1.1% year over year. Revenues of $21.4 billion surpassed the Zacks Consensus Estimate of $20.8 billion but decreased 3.7% year over year.

Moreover, management provided upbeat fourth-quarter sales guidance, projecting revenues of approximately $24 billion. Adjusted operating margin for the December quarter is projected in the range of approximately 11-11.5%, comparing favorably to the 10% reported in the September quarter.

Capital expenditures are estimated to be around $3.5 billion, with dividend payments expected to be around $5.5 billion (subject to board approval) and share repurchases of around $1 billion (which have been completed). The effective tax rate is expected to be around 23.75%.

The earnings beat by UPS in the September quarter enabled it to maintain the impressive earnings surprise record. UPS’ earnings have outpaced the Zacks Consensus Estimate in three of the past four quarters, missing the mark on the other occasion. The average beat is 11.2%.
 

United Parcel Service Price and EPS Surprise

United Parcel Service price-eps-surprise | United Parcel Service Quote

Despite the all-around outperformance in the third quarter, UPS continues to suffer from low shipment volumes. In the third quarter, too, U.S. average daily volumes declined year over year.  Per Carol Tome, UPS’ chief executive officer, the primary factors behind the decline in U.S. volumes were the planned reduction of Amazon AMZN shipments and a strategic decrease in lower-margin e-commerce volumes.

We remind investors that earlier in the year, UPS’ management has reached an agreement in principle with Amazon to lower the latter’s volume by more than 50% by June 2026. According to Tome, UPS’ chief executive officer, Amazon was not its most profitable customer. U.S. average daily volumes are down year over year, even in the first nine months of 2025, highlighting a continuous struggle.

Trade Woes Hurt Q3 International Margins

In the International segment, operating profit declined 12.8% to $691 million, with margins contracting to 14.8% from 18% a year ago. The impact of global trade challenges is evident, particularly in Asia, where volumes dropped sharply. Trade volumes declined 27.1% in the China-U.S. trade lane.

Changes in trade policy led to a decline in export volumes across higher-margin lanes, while lower-margin lanes experienced growth. This unfavorable volume mix weighed on international operating margins and further pressured the company’s forwarding business, reflecting the ongoing challenges posed by global trade realignments.

The De Minimis exemption expired on Aug. 29. The trade exemption allowed packages containing goods valued at less than $800 to enter the United States without additional taxes. The expiry of the exemption would hurt international markets by driving volumes away from the China-US trade lane.

UPS’ Overall Share Performance Remains Disappointing

Headwinds like tariff woes and declining volumes have been hurting UPS stock throughout the year. Shares of United Parcel Service have plunged in excess of 25% year to date compared with its Zacks Transportation—Air Freight and Cargo industry’s 17.9% decline. Rival FedEx's FDX price performance is better than that of UPS.

YTD Price Comparison

UPS’ Valuation: A Saving Grace

UPS is currently considered relatively undervalued, trading at a forward 12-month price to sales (P/S) of 0.9X. The figure is lower than its industry average but higher than FedEx. UPS currently has a  Value Score of B. FedEx has a value score of A.

How Should Investors Play UPS Stock Now

Agreed that UPS’ valuation is attractive. UPS’ shareholder-friendly approach is encouraging, too. The Andlauer Healthcare buyout is also a positive, expansion-oriented move.

However, near-term risks outweigh the positives. Tariff-related uncertainty and volume woes represent major headwinds. Given these challenges, buying UPS stock, despite the significant price decline, seems premature now.

Holding onto this Zacks Rank #3 (Hold) stock appears to be a prudent choice currently, while prospective investors might consider waiting for a more favorable entry point.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

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This article originally published on Zacks Investment Research (zacks.com).

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