Should Investors Bet on UPS Stock Post Q4 Earnings Beat?

Late last month, Atlanta-based United Parcel Service UPS released impressive fourth-quarter 2025 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. 

The question that naturally arises after the impressive results is whether investors should rush to buy shares of the package delivery company that transports millions of packages each business day across the globe. Let us delve deeper to answer the question.

Highlights of UPS’ Q4 Earnings

UPS’ fourth-quarter earnings per share (excluding 28 cents from non-recurring items) of $2.38 beat the Zacks Consensus Estimate of $2.22 but declined 13.5% year over year. Revenues of $24.4 billion surpassed the Zacks Consensus Estimate of $24 billion but decreased 3.3% year over year.

Additionally, management provided a better-than-expected 2026 sales guidance, projecting revenues of approximately $89.7 billion. Adjusted operating margin for 2026 is projected to be roughly 9.6%.

Capital expenditures are estimated to be around $3 billion, with dividend payments expected to be around $5.4 billion (subject to board approval). The effective tax rate is expected to be around 23%.

The earnings beat by UPS in the December 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 10.7%.

United Parcel Service Price and EPS Surprise

United Parcel Service, Inc. price-eps-surprise | United Parcel Service, Inc. Quote

Despite the all-around outperformance in the fourth quarter, UPS continues to suffer from low shipment volumes. In the fourth quarter of 2025, average daily volumes in the U.S. Domestic Package segment declined 10.6% year over year. 

UPS to Trim Workforce to Reduce Amazon Deliveries

UPS plans to cut Amazon AMZN deliveries by more than 50% by June 2026 to boost overall profitability. The company has shifted its focus to higher-margin areas such as small and medium-sized businesses and healthcare logistics from low-margin volumes like Amazon. As part of the restructuring and cost-cutting efforts, UPS announced on the fourth-quarter 2025 conference call that it would eliminate up to 30,000 operational jobs and close multiple facilities by 2026. This move aims to reduce reliance on Amazon deliveries and pivot toward more profitable business endeavors.

Per UPS’ CFO, Brian Dykes, it aims reduce about 25 million total operational work hours in 2026 because Amazon shipments are declining. Outlining the details of the job-cut plan, Dykes said that job losses will occur through attrition and a second voluntary exit program to be offered by UPS for full-time drivers.

UPS, which closed 93 buildings in 2025, has already selected 24 buildings for closure. These buildings will close in the first half of 2026. More buildings are likely to be closed later in the year. The company aims to deploy more automation across the network to trim costs and improve efficiency. These measures are expected to help UPS to achieve $3 billion in savings related to the Amazon glide-down.

International Unit Hurt by Low Volumes in Q4

In the International segment, operating profit declined 14.5% to year over year, with margins contracting to 18% from 21.6% a year ago. The impact of global trade challenges is evident, with average daily volumes plummeting 30.5% from Canada and Mexico. Trade volumes declined 20.9% 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, reflecting the ongoing challenges posed by global trade realignments.

The De Minimis exemption expired last year. The trade exemption allowed packages containing goods valued at less than $800 to enter the United States without additional taxes. This development also hurt the International segment volumes in the fourth quarter by diverting volumes away from the China-U.S. trade lane.

UPS Stock Gains in Double-Digits in 6 Months

Driven by its cost-cutting efforts, Shares of UPS have gained in excess of 28% in a year. However, UPS’ shares have lagged the Zacks Transportation-Air Freight and Cargo industry as well as rival FedEx FDX in the timeframe.

1-Year Price Comparison

Valuation Picture

On the basis of the forward 12-month Price/Sales (P/S), UPS’ shares are trading at a discount compared with the industry average. Rival FedEx is cheaper. FedEx currently has a Value Score of B, like UPS.

UPS’ P/S F12M Vs. Industry & FDX

How Should Investors Play UPS Stock Now

Due to the decline in shipping demand, volumes at UPS have suffered. A slowdown in online sales in the United States, apart from a softness in global manufacturing activity, has been hurting the demand scenario. To combat the top-line weakness, UPS is focusing on cutting costs to drive its bottom line. The company has been reconfiguring its U.S. network to boost efficiency. The shift in focus on higher-margin areas such as small and medium-sized businesses and healthcare logistics from low-margin volumes is also aimed at boosting long-term growth.

It is worth noting that the company has the brand and the network to continue generating steady cash flows in the long run. This makes UPS a compelling long-term player in the transportation space. However, the near-term headwinds, including the tariff-induced uncertainties, are hard to ignore.

Concerns over the sustainability of UPS’ dividends in this era of demand weakness represent a further challenge. However, UPS’ expansion efforts look good.

Considering all factors, 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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