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Based in Atlanta, Zacks Rank #5 (Strong Sell) stock United Parcel Service ((UPS - Free Report) ) is the world’s largest express carrier and package delivery company. Founded in 1907, UPS provides specialized transportation and logistics services in the United States and internationally. The company offers a range of supply chain solutions, such as freight forwarding, customs brokerage, fulfillment, returns, financial transactions, and repairs. UPS transports millions of packages each business day across the globe. In 2024, the company delivered 22.4 million packages per day on average.
UPS to Slash Amazon Business in Half
E-commerce juggernaut Amazon ((AMZN - Free Report) ) is UPS’s largest customer by far in terms of volume and revenue. Unfortunately for UPS, UPS Amazon deliveries are also some of the least profitable sides of the business, with tiny margins. Facing a dilemma, UPS management decided earlier this year to cut its Amazon delivery volume by more than 50% by the end of next year. While the bold move may reduce UPS’s reliance on Amazon and increase margins, it will be near-impossible to fill the gigantic volume void any time soon, leaving shareholders with more questions than answers.
Weakness in Europe and Asia Persists
Geopolitical uncertainty, global trade concerns, and poor consumer sentiment continue to contribute to the economic slowdown and slowing demand for UPS in Asia and Europe. With all the uncertainty, UPS forward guidance forecasts that revenue will be lower in 2025 in 2024.
Unionization Means Higher Costs
UPS is the largest employer of members of the “Teamsters” union. After a strike, UPS was forced to increase full-time workers’ pay significantly by $7.50 per hour. This deal has hurt the company’s profitability dramatically, and when the agreement ends in 2028, UPS is likely to have to increase pay even more or face another strike.
Image Source: Zacks Investment Research
Relative Price Weakness Versus the Market
Relative weakness is another major red flag for UPS. Year-to-date, shares are down 19.7% while the S&P 500 Index is down only 3.4%. In other words, UPS shares fell in tandem with the market but failed to recover with it.
Image Source: Zacks Investment Research
Bottom Line
UPS faces significant headwinds as it navigates a complex landscape marked by a significant shift in its Amazon relationship, persistent weakness in key international markets, and increasing labor costs.
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Bear of the Day: United Parcel Service (UPS)
UPS Company Overview
Based in Atlanta, Zacks Rank #5 (Strong Sell) stock United Parcel Service ((UPS - Free Report) ) is the world’s largest express carrier and package delivery company. Founded in 1907, UPS provides specialized transportation and logistics services in the United States and internationally. The company offers a range of supply chain solutions, such as freight forwarding, customs brokerage, fulfillment, returns, financial transactions, and repairs. UPS transports millions of packages each business day across the globe. In 2024, the company delivered 22.4 million packages per day on average.
UPS to Slash Amazon Business in Half
E-commerce juggernaut Amazon ((AMZN - Free Report) ) is UPS’s largest customer by far in terms of volume and revenue. Unfortunately for UPS, UPS Amazon deliveries are also some of the least profitable sides of the business, with tiny margins. Facing a dilemma, UPS management decided earlier this year to cut its Amazon delivery volume by more than 50% by the end of next year. While the bold move may reduce UPS’s reliance on Amazon and increase margins, it will be near-impossible to fill the gigantic volume void any time soon, leaving shareholders with more questions than answers.
Weakness in Europe and Asia Persists
Geopolitical uncertainty, global trade concerns, and poor consumer sentiment continue to contribute to the economic slowdown and slowing demand for UPS in Asia and Europe. With all the uncertainty, UPS forward guidance forecasts that revenue will be lower in 2025 in 2024.
Unionization Means Higher Costs
UPS is the largest employer of members of the “Teamsters” union. After a strike, UPS was forced to increase full-time workers’ pay significantly by $7.50 per hour. This deal has hurt the company’s profitability dramatically, and when the agreement ends in 2028, UPS is likely to have to increase pay even more or face another strike.
Image Source: Zacks Investment Research
Relative Price Weakness Versus the Market
Relative weakness is another major red flag for UPS. Year-to-date, shares are down 19.7% while the S&P 500 Index is down only 3.4%. In other words, UPS shares fell in tandem with the market but failed to recover with it.
Image Source: Zacks Investment Research
Bottom Line
UPS faces significant headwinds as it navigates a complex landscape marked by a significant shift in its Amazon relationship, persistent weakness in key international markets, and increasing labor costs.