UPS Gets Court Approval for $150K Driver Buyouts: Will This Ease Cost?

United Parcel Service UPS will move forward with providing $150,000 buyout offers to certain drivers after a federal judge denied an attempt by the International Brotherhood of Teamsters to halt its workforce reduction initiative. The union contended that the buyouts breached the existing contract, but the judge ruled that the claims of harm were far from being substantiated.

As part of the restructuring and cost-cutting efforts, UPS announced on the fourth-quarter 2025 conference call last month that it would eliminate up to 30,000 operational jobs and close multiple facilities by 2026. This move aims to reduce reliance on Amazon. com AMZN deliveries and pivot toward more profitable business endeavors.

We remind investors that in 2025, UPS’ management reached an agreement in principle with Amazon to cut its shipment volume by more than 50% by June 2026. CEO Carol Tomé stated that Amazon was not UPS’ most profitable customer. The planned volume reduction is prompting UPS to adjust and right-size its network accordingly.

To this end, UPS welcomed the ruling, which came after the union sued it for breach of the National contract, and intends to share plans to provide additional details to the drivers regarding the buyout packages in the coming days.

UPS plans to shrink its driver workforce in response to an 8.6% decline in package volumes last year, a decline it anticipates will persist into 2026 due to moving away from high-volume, low-margin Amazon shipments.

With the court ruling in favor of UPS on the issue, it remains to be seen how the union reacts to the same. We expect investors to remain focused on further updates on this burning issue.

UPS’ competitor FedEx FDX is also implementing cost-cutting measures to address the soft demand environment and improve operations through its Network 2.0 initiative. A few years back, FedEx introduced DRIVE, a broad program aimed at enhancing long-term profitability.

DRIVE generated $1.8 billion in permanent savings in fiscal 2024 and delivered an additional $2.2 billion in cost savings in fiscal 2025. These efforts include lowering flight frequencies, parking aircraft and reducing headcount. For fiscal 2026, FedEx’s management expects to achieve $1 billion in transformation-related savings through initiatives such as DRIVE and Network 2.0.

UPS’ Price Performance, Valuation & Estimates

Driven by its cost-cutting efforts, shares of UPS have gained in excess of 31% in six months. However, the company has underperformed its industry in the same timeframe.

6-Month Price Comparison

From a valuation standpoint, UPS trades at a discount to industrial levels on the basis of the 12-month forward price-to-sales ratio.

The Zacks Consensus Estimate for the first quarter, second quarter, full-year 2026 and 2027 has been revised downwards in the past 60 days.

UPS’ Zacks Rank

UPS currently carries a Zacks Rank #3 (Hold). 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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