UPS (NYSE: UPS) recently posted its Q4 results, with revenues missing and earnings exceeding the street estimates. It reported revenue of $25.3 billion and adjusted earnings of $2.75 per share, compared to the consensus estimates of $25.4 billion and $2.53, respectively. However, the company’s outlook fell short of expectations. UPS plans to lower volumes with Amazon by more than 50% by the second half of 2026. This didn’t sit well with the investors, and the stock dropped 14% on Thursday, January 30. As an aside, see how a new FDA approval was received in What’s Happening With VRTX Stock?
UPS stock, with -11% returns since the beginning of 2024, has underperformed the S&P 500 index, up 27%. A softness in shipping volume post-pandemic has weighed on the company’s stock price growth lately. If you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
How Did UPS Fare In Q4?
UPS’s revenue of $25.3 billion in Q4 was up 1.5% y-o-y, amid a soft demand environment. Supply Chain Solutions segment sales were down 9.1%, while the U.S. Domestic Package sales were up 2.2% and the International sales rose 6.9%. The company saw its U.S. Domestic average daily package volume decline 0.3%. However, international volume was up 8.8% y-o-y. The average revenue per piece for the U.S. Domestic packages was up 2.4%, but it was down 0.4% for international packages. UPS’s divestiture in Coyote resulted in lower revenue for its supply chain solutions segment.
The consolidated adjusted operating margin stood at 12.3%. Looking at the bottom line, adjusted EPS rose 11% y-o-y to $2.75 in Q4. Looking forward, UPS expects its 2025 sales to be around $89 billion, much lower than the $95 billion consensus estimate. This can be attributed to the company’s decision to reduce its shipments for Amazon. UPS aims to expand its profitability with this step. It expects operating margin to expand by 100 bps y-o-y to 10.8% in 2025.
What Does This Mean For UPS Stock?
Although UPS posted better than expected earnings in Q4, its stock is weighed down amid a top-line miss and downbeat outlook. Even if we look at a slightly longer time frame, the performance of UPS stock with respect to the index over the last four-year period has been lackluster. Returns for the stock were 30% in 2021, -15% in 2022, -6% in 2023, and -16% in 2024.
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Given the current uncertain macroeconomic environment around rate cuts and geopolitical tensions, could UPS face a similar situation as it did in 2023 and 2024 and underperform the S&P over the next 12 months — or will it see a strong jump? While we will soon update our model for UPS to reflect the latest results, we think UPS stock now has ample room for growth. At its current levels of $115, UPS trades at under 15x trailing earnings, versus the stock’s average P/E ratio of 17x over the last five years. Although a cut in sales outlook amid reduced Amazon shipments does impact the company’s top-line, an improvement in profitability should bode well for its earnings growth in the long run. As such, investors will likely be better off picking UPS stock in the current fall for robust long-term gains.
While UPS stock looks like it has some room for growth, it is helpful to see how UPS’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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