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UPS' Stock Valuation Looks Attractive: Buy or Wait for Now?
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Key Takeaways
UPS stock trades at a valuation discount, with a forward P/S of 1.03X and a 6.1% dividend yield.
Shipment volumes declined due to Amazon pullback and weak e-commerce traffic, hurting revenue growth.
Trade headwinds and expiration of the De Minimis rule pressured international margins and freight volume.
United Parcel Service (UPS - Free Report) , the Atlanta-based shipping and delivery giant, appears particularly compelling from a valuation standpoint. With a forward price-to-sales (P/S) of 1.03X, UPS shares trade at a discount to the Zacks Transportation—Air Freight and Cargo industry. Rival FedEx (FDX - Free Report) is valued at an even deeper discount. UPS currently carries a Value Score of B, while FedEx has a Value Score of A.
UPS’ P/S F12M vs. the Industry & FDX
Image Source: Zacks Investment Research
This valuation discount underscores investor concerns about UPS’ revenues due to low shipment volumes. Margin compression, ongoing cost inflation and tariff-related headwinds are also weighing on the company’s near-term performance.
Unimpressive Price Performance
As already mentioned, factors like tariff woes and declining volumes have been constantly hurting UPS stock. Shares of United Parcel Service have plunged in excess of 17% in a year compared with its industry’s 5.6% decline. Rival FedEx's price performance is better than that of UPS.
1-Year Price Comparison
Image Source: Zacks Investment Research
Other Headwinds in UPS’ Path
Low Shipment Volumes: Despite consistently delivering notable earnings surprises, UPS continues to face headwinds from weak shipment volumes. U.S. average daily volumes also declined year over year in the third quarter. CEO Carol Tomé attributed the drop largely to a planned reduction in Amazon (AMZN - Free Report) shipments and a deliberate pullback from lower-margin e-commerce traffic.
We remind investors that last 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 through the first nine months of 2025, underscoring the company’s ongoing volume-related challenges.
This volume pressure is expected to continue in the final quarter of 2025 as well. UPS is scheduled to report results on Jan. 27. We forecast consolidated volumes to drop 10.6% from fourth-quarter 2024 actuals.
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, 2025. 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.
Not all Brickbats, Some Roses as Well
Andlauer Healthcare Buyout: In November, UPS completed its acquisition of Canadian supply-chain company Andlauer Healthcare Group for $1.6 billion (C$2.2 billion). The transaction valued Andlauer at C$55.00 per share in cash for its shareholders.
The deal strengthens UPS’ footprint in the complex healthcare logistics space. With Andlauer’s specialized cold-chain infrastructure and expertise added to its network, UPS Healthcare customers are expected to benefit from shorter transit times, improved end-to-end visibility, expanded global reach and enhanced quality assurance standards.
UPS’ Dividend Strength Enhances Appeal: UPS remains focused on returning capital to shareholders, supported by its consistent history of maintaining or increasing dividends every year since going public in 1999. Currently, the stock carries a dividend yield of 6.1%, well above the industry composite average of 4.1%. This above-industry yield is especially appealing for income-oriented investors and reflects management’s confidence in UPS’ cash flow generation and long-term prospects.
Over the past five years, UPS has raised its dividend five times. This is encouraging, as companies with a strong record of annual dividend growth often offer greater upside for capital appreciation than those that simply pay a steady dividend. UPS’ solid dividend history also points to lower susceptibility to sharp market swings, helping position the stock as a buffer against economic or political uncertainty, as well as broader market volatility.
UPS’ Buyback Program Lifts Confidence: Beyond its regular dividend payouts, UPS has also remained active with share repurchases. In 2023, its board authorized a $5 billion buyback program. In 2024, UPS repurchased $500 million worth of shares, and it has already fulfilled the target of $1 billion repurchase for 2025.
UPS’ healthy cash flow generation continues to support its shareholder-friendly approach. The company generated $6.3 billion in free cash flow in 2024, underscoring its financial strength and ability to keep returning value to investors.
Impressive Earnings History: UPS’ earnings have exceeded the Zacks Consensus Estimate in three of the past four quarters, falling short only once. Its average earnings beat over this period stands at 11.2%.
UPS offers a mixed risk-reward setup at current levels. While its valuation discount relative to the industry may make it an appealing long-term entry opportunity, the share price weakness, continued softness in revenues and volumes, rising labor costs and ongoing trade-related headwinds underscore notable near-term challenges that could keep investor sentiment under pressure.
Given these factors, a neutral view seems appropriate. Current shareholders may be better off holding the stock, as UPS’ core fundamentals remain sound and its long-term growth catalysts are still in place. However, prospective investors may want to wait for clearer evidence of an operational turnaround before deploying new capital. UPS currently carries a Zacks Rank #3 (Hold).
Image: Bigstock
UPS' Stock Valuation Looks Attractive: Buy or Wait for Now?
Key Takeaways
United Parcel Service (UPS - Free Report) , the Atlanta-based shipping and delivery giant, appears particularly compelling from a valuation standpoint. With a forward price-to-sales (P/S) of 1.03X, UPS shares trade at a discount to the Zacks Transportation—Air Freight and Cargo industry. Rival FedEx (FDX - Free Report) is valued at an even deeper discount. UPS currently carries a Value Score of B, while FedEx has a Value Score of A.
UPS’ P/S F12M vs. the Industry & FDX
This valuation discount underscores investor concerns about UPS’ revenues due to low shipment volumes. Margin compression, ongoing cost inflation and tariff-related headwinds are also weighing on the company’s near-term performance.
Unimpressive Price Performance
As already mentioned, factors like tariff woes and declining volumes have been constantly hurting UPS stock. Shares of United Parcel Service have plunged in excess of 17% in a year compared with its industry’s 5.6% decline. Rival FedEx's price performance is better than that of UPS.
1-Year Price Comparison
Other Headwinds in UPS’ Path
Low Shipment Volumes: Despite consistently delivering notable earnings surprises, UPS continues to face headwinds from weak shipment volumes. U.S. average daily volumes also declined year over year in the third quarter. CEO Carol Tomé attributed the drop largely to a planned reduction in Amazon (AMZN - Free Report) shipments and a deliberate pullback from lower-margin e-commerce traffic.
We remind investors that last 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 through the first nine months of 2025, underscoring the company’s ongoing volume-related challenges.
This volume pressure is expected to continue in the final quarter of 2025 as well. UPS is scheduled to report results on Jan. 27. We forecast consolidated volumes to drop 10.6% from fourth-quarter 2024 actuals.
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, 2025. 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.
Not all Brickbats, Some Roses as Well
Andlauer Healthcare Buyout: In November, UPS completed its acquisition of Canadian supply-chain company Andlauer Healthcare Group for $1.6 billion (C$2.2 billion). The transaction valued Andlauer at C$55.00 per share in cash for its shareholders.
The deal strengthens UPS’ footprint in the complex healthcare logistics space. With Andlauer’s specialized cold-chain infrastructure and expertise added to its network, UPS Healthcare customers are expected to benefit from shorter transit times, improved end-to-end visibility, expanded global reach and enhanced quality assurance standards.
UPS’ Dividend Strength Enhances Appeal: UPS remains focused on returning capital to shareholders, supported by its consistent history of maintaining or increasing dividends every year since going public in 1999. Currently, the stock carries a dividend yield of 6.1%, well above the industry composite average of 4.1%. This above-industry yield is especially appealing for income-oriented investors and reflects management’s confidence in UPS’ cash flow generation and long-term prospects.
Over the past five years, UPS has raised its dividend five times. This is encouraging, as companies with a strong record of annual dividend growth often offer greater upside for capital appreciation than those that simply pay a steady dividend. UPS’ solid dividend history also points to lower susceptibility to sharp market swings, helping position the stock as a buffer against economic or political uncertainty, as well as broader market volatility.
UPS’ Buyback Program Lifts Confidence: Beyond its regular dividend payouts, UPS has also remained active with share repurchases. In 2023, its board authorized a $5 billion buyback program. In 2024, UPS repurchased $500 million worth of shares, and it has already fulfilled the target of $1 billion repurchase for 2025.
UPS’ healthy cash flow generation continues to support its shareholder-friendly approach. The company generated $6.3 billion in free cash flow in 2024, underscoring its financial strength and ability to keep returning value to investors.
Impressive Earnings History: UPS’ earnings have exceeded the Zacks Consensus Estimate in three of the past four quarters, falling short only once. Its average earnings beat over this period stands at 11.2%.
United Parcel Service Price and EPS Surprise
United Parcel Service price-eps-surprise | United Parcel Service Quote
UPS’ Investment Rationale
UPS offers a mixed risk-reward setup at current levels. While its valuation discount relative to the industry may make it an appealing long-term entry opportunity, the share price weakness, continued softness in revenues and volumes, rising labor costs and ongoing trade-related headwinds underscore notable near-term challenges that could keep investor sentiment under pressure.
Given these factors, a neutral view seems appropriate. Current shareholders may be better off holding the stock, as UPS’ core fundamentals remain sound and its long-term growth catalysts are still in place. However, prospective investors may want to wait for clearer evidence of an operational turnaround before deploying new capital. UPS currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.