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Is UPS' Cheap Valuation Reason Enough to Invest in the Stock?
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Key Takeaways
UPS trades at a forward P/S of 0.97X, below its industry and the S&P 500, with a dividend yield of 6.5%.
The $1.6B Andlauer buyout boosts UPS' healthcare logistics capabilities and global cold-chain reach.
UPS faces weak shipment volumes and global trade pressures, with shares down over 21% in the past year.
United Parcel Service (UPS - Free Report) , the Atlanta-based parcel delivery heavyweight, looks highly attractive on valuation grounds. With a forward price-to-sales (P/S) of 0.97X, UPS stock trades at a discount to the Zacks Transportation—Air Freight and Cargo industry and the S&P 500. Rival FedEx (FDX - Free Report) trades at a further discount. United Parcel Service currently has a Value Score of B, while FedEx has a Value Score of A.
UPS’ P/S F12M vs. the Industry, the S&P 500 & FDX
Image Source: Zacks Investment Research
Now, the question is whether it is worth buying the stock at current prices. Let us dig deeper to find out.
Further Factors Working in Favor of UPS
Andlauer Healthcare Buyout: In November, UPS finalized its acquisition of Canadian supply-chain firm Andlauer Healthcare Group for $1.6 billion (C$2.2 billion), with the deal valuing it at C$55.00 per share in cash for shareholders.
The acquisition enhances UPS’ presence in the complex healthcare logistics sector. By incorporating Andlauer’s specialized cold-chain infrastructure and capabilities, UPS Healthcare customers are expected to gain from reduced transit times, better end-to-end visibility, broader global coverage and higher quality assurance standards.
UPS’ Dividend Strength Enhances Appeal: UPS places a strong emphasis on returning capital to shareholders, reflected in its consistent record of maintaining or raising dividends every year since its public listing in 1999. At present, the company offers a dividend yield of 6.5%, well above the industry composite average of 4.4%. This higher-than-industry yield is particularly attractive to income-focused investors and underscores management’s confidence in UPS’ cash flow generation and long-term outlook.
Over the past five years, UPS has increased its dividend five times. This is a positive indicator, as companies with a solid history of year-over-year dividend growth often provide greater potential for capital appreciation compared with firms that merely pay dividends. UPS’ robust dividend track record also suggests lower vulnerability to sharp market fluctuations and positions the stock as a hedge against economic or political uncertainty, as well as broader market volatility. UPS expects to make dividend payments worth $5.5 billion in the current year.
UPS’ Buyback Program Lifts Confidence: In addition to cheering investors with regular dividend payments, UPS is active on the buyback front. In 2023, UPS’ board approved a share repurchase authorization for $5 billion. In 2024, UPS bought shares worth $500 million. UPS has already completed the share repurchase target for the current year of $1 billion
Strong cash flow generation is serving UPS well, allowing the company to remain committed to returning value to its shareholders. UPS demonstrates financial strength with $6.3 billion in free cash flow in 2024.
Impressive Earnings History: UPS has outpaced the Zacks Consensus Estimate for earnings in three of the past four quarters, missing the consensus mark on the other occasion. The average beat is 11.2%.
Low Shipment Volumes: Despite delivering a strong record of earnings surprises, UPS continues to face challenges from weak shipment volumes. U.S. average daily volumes declined year over year in the third quarter as well. According to CEO Carol Tomé, the drop in U.S. volumes was mainly caused by a planned reduction in Amazon (AMZN - Free Report) shipments and a deliberate pullback from lower-margin e-commerce traffic.
We remind investors that earlier this year, UPS management reached an agreement in principle with Amazon to cut the latter’s shipping volume by more than 50% by June 2026. As noted by Tomé, Amazon was not among UPS’ most profitable customers. U.S. average daily volumes have remained lower year over year, even through the first nine months of 2025, underscoring the company’s ongoing volume-related challenges.
Trade Woes Hurting International Margins: In the third quarter of 2025, operating profit in the International segment fell 12.8% to $691 million, while margins narrowed to 14.8% from 18% in the prior year. The effects of global trade headwinds were particularly visible in Asia, where shipment volumes declined significantly. Trade volumes on the China-U.S. route plunged 27.1%.
Shifts in trade policy resulted in lower export volumes across higher-margin lanes, even as activity increased in lower-margin routes. This unfavorable change in volume mix pressured international operating margins and added further strain on the company’s forwarding business, highlighting the persistent challenges stemming from global trade realignments.
The De Minimis exemption expired on Aug. 29. This provision had allowed packages valued under $800 to enter the United States without incurring additional duties. Its expiration is expected to negatively impact international markets by diverting volumes away from the China-U.S. trade lane.
Disappointing Price Performance: Headwinds like tariff woes and declining volumes have been constantly hurting UPS stock. Shares of United Parcel Service have plunged in excess of 21% in a year compared with its industry’s 12.5% decline. Rival FedEx's price performance is better than that of UPS.
1-Year Price Comparison
Image Source: Zacks Investment Research
How Should Investors Approach UPS Stock Now?
While UPS’ valuation appears attractive, its shareholder-friendly policies are also a positive. Additionally, the acquisition of Andlauer Healthcare represents a constructive, growth-focused development.
That said, near-term challenges overshadow these strengths. Ongoing tariff-related uncertainty and persistent volume pressures remain significant headwinds. In light of these risks, initiating a position in UPS at this stage — despite the notable decline in its share price — may be premature.
Maintaining a position in this Zacks Rank #3 (Hold) stock seems like a sensible approach for now, while potential investors may prefer to wait for a more attractive entry point.
Image: Bigstock
Is UPS' Cheap Valuation Reason Enough to Invest in the Stock?
Key Takeaways
United Parcel Service (UPS - Free Report) , the Atlanta-based parcel delivery heavyweight, looks highly attractive on valuation grounds. With a forward price-to-sales (P/S) of 0.97X, UPS stock trades at a discount to the Zacks Transportation—Air Freight and Cargo industry and the S&P 500. Rival FedEx (FDX - Free Report) trades at a further discount. United Parcel Service currently has a Value Score of B, while FedEx has a Value Score of A.
UPS’ P/S F12M vs. the Industry, the S&P 500 & FDX
Now, the question is whether it is worth buying the stock at current prices. Let us dig deeper to find out.
Further Factors Working in Favor of UPS
Andlauer Healthcare Buyout: In November, UPS finalized its acquisition of Canadian supply-chain firm Andlauer Healthcare Group for $1.6 billion (C$2.2 billion), with the deal valuing it at C$55.00 per share in cash for shareholders.
The acquisition enhances UPS’ presence in the complex healthcare logistics sector. By incorporating Andlauer’s specialized cold-chain infrastructure and capabilities, UPS Healthcare customers are expected to gain from reduced transit times, better end-to-end visibility, broader global coverage and higher quality assurance standards.
UPS’ Dividend Strength Enhances Appeal: UPS places a strong emphasis on returning capital to shareholders, reflected in its consistent record of maintaining or raising dividends every year since its public listing in 1999. At present, the company offers a dividend yield of 6.5%, well above the industry composite average of 4.4%. This higher-than-industry yield is particularly attractive to income-focused investors and underscores management’s confidence in UPS’ cash flow generation and long-term outlook.
Over the past five years, UPS has increased its dividend five times. This is a positive indicator, as companies with a solid history of year-over-year dividend growth often provide greater potential for capital appreciation compared with firms that merely pay dividends. UPS’ robust dividend track record also suggests lower vulnerability to sharp market fluctuations and positions the stock as a hedge against economic or political uncertainty, as well as broader market volatility. UPS expects to make dividend payments worth $5.5 billion in the current year.
UPS’ Buyback Program Lifts Confidence: In addition to cheering investors with regular dividend payments, UPS is active on the buyback front. In 2023, UPS’ board approved a share repurchase authorization for $5 billion. In 2024, UPS bought shares worth $500 million. UPS has already completed the share repurchase target for the current year of $1 billion
Strong cash flow generation is serving UPS well, allowing the company to remain committed to returning value to its shareholders. UPS demonstrates financial strength with $6.3 billion in free cash flow in 2024.
Impressive Earnings History: UPS has outpaced the Zacks Consensus Estimate for earnings in three of the past four quarters, missing the consensus mark on the other occasion. The average beat is 11.2%.
United Parcel Service Price and EPS Surprise
United Parcel Service, Inc. price-eps-surprise | United Parcel Service, Inc. Quote
Some Headwinds that Cannot Be Ignored
Low Shipment Volumes: Despite delivering a strong record of earnings surprises, UPS continues to face challenges from weak shipment volumes. U.S. average daily volumes declined year over year in the third quarter as well. According to CEO Carol Tomé, the drop in U.S. volumes was mainly caused by a planned reduction in Amazon (AMZN - Free Report) shipments and a deliberate pullback from lower-margin e-commerce traffic.
We remind investors that earlier this year, UPS management reached an agreement in principle with Amazon to cut the latter’s shipping volume by more than 50% by June 2026. As noted by Tomé, Amazon was not among UPS’ most profitable customers. U.S. average daily volumes have remained lower year over year, even through the first nine months of 2025, underscoring the company’s ongoing volume-related challenges.
Trade Woes Hurting International Margins: In the third quarter of 2025, operating profit in the International segment fell 12.8% to $691 million, while margins narrowed to 14.8% from 18% in the prior year. The effects of global trade headwinds were particularly visible in Asia, where shipment volumes declined significantly. Trade volumes on the China-U.S. route plunged 27.1%.
Shifts in trade policy resulted in lower export volumes across higher-margin lanes, even as activity increased in lower-margin routes. This unfavorable change in volume mix pressured international operating margins and added further strain on the company’s forwarding business, highlighting the persistent challenges stemming from global trade realignments.
The De Minimis exemption expired on Aug. 29. This provision had allowed packages valued under $800 to enter the United States without incurring additional duties. Its expiration is expected to negatively impact international markets by diverting volumes away from the China-U.S. trade lane.
Disappointing Price Performance: Headwinds like tariff woes and declining volumes have been constantly hurting UPS stock. Shares of United Parcel Service have plunged in excess of 21% in a year compared with its industry’s 12.5% decline. Rival FedEx's price performance is better than that of UPS.
1-Year Price Comparison
Image Source: Zacks Investment Research
How Should Investors Approach UPS Stock Now?
While UPS’ valuation appears attractive, its shareholder-friendly policies are also a positive. Additionally, the acquisition of Andlauer Healthcare represents a constructive, growth-focused development.
That said, near-term challenges overshadow these strengths. Ongoing tariff-related uncertainty and persistent volume pressures remain significant headwinds. In light of these risks, initiating a position in UPS at this stage — despite the notable decline in its share price — may be premature.
Maintaining a position in this Zacks Rank #3 (Hold) stock seems like a sensible approach for now, while potential investors may prefer to wait for a more attractive entry point.
You can view the full list of today’s Zacks Rank #1 (Strong Buy) stocks here.