UPS stock (ISIN: US9113121068) is the world's leading logistics and parcel delivery service provider on the stock market. It benefits greatly from megatrends such as the growing importance of e-commerce and global trade. The explosive growth of online retail alone has brought the company additional volume in recent years. And even during the coronavirus pandemic, the Americans benefited from disrupted supply chains through higher prices – a special economic situation.
The stock has been suffering for some time now as a result of a return to normality. Chronic price pressure, rising personnel costs, strikes, volatile fuel prices, and the rapidly growing parcel volume during peak business periods pose challenges. In addition, Amazon (ISIN: US0231351067), as the largest customer, is increasingly delivering its own parcels, thus becoming a competitor to UPS. The share price performance reflects these developments well. Over a period of 20 years, there has been a meager gain of only 41 percent. In the meantime, however, a fivefold increase was possible.
Source: Stock price
Despite these challenges, UPS offer investors a clear advantage: stable and attractive dividends. With a current dividend yield of 6.2 percent, UPS is well above the market average and are particularly attractive to income investors. A long series of dividend payments and increases speaks in favor of the company. Meanwhile, robust cash flows could ensure that this continues for some time despite headwinds. The current UPS stock analysis will reveal whether the stock is ultimately a buy.
United Parcel Service, or UPS for short, is the world's largest parcel delivery company. With a market capitalization of US$89 billion, its dominance is also reflected in its market valuation. No other publicly traded logistics company is worth more than the US logistics provider. FedEx follows in second place (US$73 billion), followed by the German DHL Group with a market capitalization of just under US$62 billion (DHL Group analysis).
Source: StocksGuide Ai
The core of the business is the reliable transport and delivery of goods and the management of complex supply chains for companies. The business model is based on a global network of transport vehicles, aircraft, sorting centers, and IT systems. It enables the efficient handling of large volumes of parcels and the provision of different service levels. The segments are classified into the following areas:
Although UPS operates internationally, the majority of its revenue is generated in the United States. Around 77 percent of revenue is generated there.
The U.S. Domestic Package segment comprises the shipping of packages within the United States. As already mentioned, this is not only UPS's largest business segment in terms of volume, but also by far the one with the highest revenue. In this segment, UPS handles the pickup, sorting, transport, and delivery of packages for business and private customers. A significant part of the business comes from the B2B sector, while online retail has become increasingly important in recent years. For online retailers such as Amazon, UPS has long been the solution for delivering goods to customers. The B2B sector accounts for 40 to 45 percent of the volume.
The business model benefits greatly from economies of scale, as the high fixed costs for infrastructure and personnel can be efficiently distributed across large shipment volumes. This makes it all the more difficult that Amazon will reduce its parcel volume with UPS by more than 50 percent by mid-2026. At the same time, the segment is characterized by intense competition, high labor costs, and a strong dependence on economic developments in the US. In line with its “better not bigger” strategy, UPS could thus handle less volume but be significantly more profitable. As the largest customer, Amazon was known to be strong in price negotiations.
The International Package segment, on the other hand, focuses on cross-border parcel shipping and includes both express and standard services. UPS uses its global air and ground network for this purpose and also handles complex tasks such as customs clearance and compliance with international regulations.
This segment generally achieves higher margins than the domestic business, as international shipments are more time-sensitive and customers are willing to pay more. In fact, the adjusted operating margin was recently 21.3 percent, significantly higher than that of the US business at 14.8 percent. Here, too, there are megatrends that are setting the direction. These include, for example, the growth of global trade and cross-border e-commerce. On the other hand, there are geopolitical risks and trade barriers.
With its Supply Chain Solutions segment, UPS is expanding its business model beyond traditional parcel shipping. In this area, it offers comprehensive logistics services such as warehousing, order processing, freight forwarding, customs management, and specialized industry solutions. This area is strategically important, but recently accounted for only around 14 percent of revenue. UPS acts as a long-term logistics partner and integrates its services deeply into its customers' value chains. The business model is more service- and IT-driven and less dependent on individual shipments. This creates more stable customer relationships and makes the company less dependent on short-term fluctuations in parcel volume.
UPS competes with several large companies that offer similar services in the areas of parcel delivery and logistics. Its main competitor is FedEx, which competes with UPS in both the domestic and international parcel business. FedEx is particularly strong in express delivery and, like UPS, has a strong presence in the US and worldwide. Another significant competitor is the DHL Group. It has a strong market position in Europe and Asia and is particularly active in the international freight and logistics business, where it competes with UPS in some regions.
Source: StocksGuide Ai
Amazon Logistics is a growing competitor for UPS. The subsidiary of tech giant Amazon has invested heavily in its own logistics and delivery networks in recent years and is increasingly becoming a direct competitor in e-commerce shipping, especially in the areas of fast delivery and parcel delivery to end consumers. In the US, the United States Postal Service (USPS) is also an important competitor, particularly in the area of low-cost standard parcel delivery. Although the USPS lags behind UPS in terms of speed and flexibility, it still plays a significant role in the parcel market. XPO Logistics is also a competitor, especially in the area of integrated supply chain solutions. XPO offers customized logistics services for various industries and competes with UPS particularly in the areas of transportation and warehousing. Finally, Royal Mail is also a relevant competitor in the UK, especially for domestic and international shipping services, particularly in Europe.
Source: Revenue TTM
A comparison of the revenue trends of the largest players shows a largely synchronous picture. However, FedEx stands out with its clear outperformance.
The market for parcel and logistics services is characterized by a number of unique features that make it both challenging and attractive. One of the most striking features of this market is the high level of competition. Although the market is relatively concentrated among the global giants, price competition is fierce. All the top players offer similar services, which leads to intense price competition and constant pressure to innovate. In addition, the market is highly seasonal. Shipping volumes increase significantly, especially during peak periods such as the Christmas season or major sales events (e.g., Black Friday). This poses logistical challenges for companies, but these can be overcome. However, it is precisely this seasonality that can always lead to capacity bottlenecks. Another characteristic is the dependence on technological developments. The industry has been investing heavily in new technologies such as automation, AI, robotics, and drone technology for some time in order to make the shipping process more efficient and cost-effective. Amazon is perhaps the pioneer of this development, as the company has embedded significantly more innovative spirit and start-up culture in its DNA. These innovations are continuously changing the industry as they reduce operating costs and enable new services, which in turn influence customer behavior.
Although the logistics market is a free market, it is still regulated, especially in international shipping. Each country has its own customs regulations and security requirements that affect international trade and shipping. Companies must therefore continuously adapt to these regulations, which adds to the complexity. Supply chains are also more vulnerable to geopolitical tensions or trade conflicts.
Source: StocksGuide Ai
Another striking feature of the market is the growth momentum of e-commerce. The rapid rise of online shopping and related activities has led to a steady increase in demand for parcel deliveries for years. This is fundamentally good for logistics companies, but it also presents challenges. For example, the increasing demand for fast, flexible, and cost-effective deliveries is forcing them to optimize their last-mile deliveries—especially in urban areas, where competition and logistics costs are particularly high. The market is also capital-intensive, as companies such as UPS have to invest heavily in their infrastructure, which includes distribution centers, transport fleets, and IT systems. It is difficult to enforce high prices, especially with large customers. High fixed costs force logistics companies to offer price discounts when capacity utilization is low. Due to these high investment requirements, the industry is dominated by just a few large players who have the necessary resources to remain competitive on a global scale. UPS is known to be the largest among them. At the same time, however, this also means that market entry for new competitors is relatively difficult and expensive – a real moat.
The latest quarterly report for the third quarter of 2025 shows that UPS remains in a phase of strategic restructuring but remains stable in operational terms. Overall, the business performed solidly with good profitability and a clear focus on efficiency and long-term value creation. Specifically, however, revenue declined by 4 percent in the third quarter of 2025, with net income falling by as much as 15 percent. Compared to previous quarters, this represents a negative trend. Weak economic conditions and the negative effects of Trump's tariff policy weighed particularly heavily on the results.
Source: Financial data
Growth in the US domestic business was subdued. Revenues fell by 2.6 percent, mainly due to lower shipment volumes. At the same time, however, UPS managed to partially offset this effect with higher revenues per parcel and additional air freight activities. However, profitability, measured by the operating margin of 4.5 percent, remained under pressure. In the long term, more needs to be delivered. The weak margin reflects the ongoing challenges posed by cost structures, wages, and intense competition in the US market.
By contrast, the international parcel business performed significantly better, with revenue growth of 5.9 percent. Revenue for the segment rose to US$4.7 billion, driven by a 4.8 percent increase in average daily volume. UPS benefited from rising shipping volumes and stable demand for cross-border and time-critical shipments. The segment's operating profit in the third quarter was $676 million, representing a strong operating margin of 14.5 percent. This segment therefore remains an important earnings driver. Compared to the domestic business, it also achieves structurally higher margins. In addition, it is less dependent on individual national economic cycles. However, size alone is not enough to steer the group in a different direction. Its share of revenue is only 20 percent.
Finally, revenue in the smallest segment, Supply Chain Solutions, fell significantly by 22 percent to US$2.5 billion. The decline is mainly attributable to the sale of the Coyote business unit in the third quarter of 2024. Despite the decline in sales, profitability improved significantly. Operating income rose to US$525 million, corresponding to an operating margin of almost 20.8 percent. Adjusted, the margin even reached 21.3 percent. It was additionally supported by the sale of real estate.
UPS expects significantly higher revenue in the fourth quarter of 2025, reflecting strong seasonal demand at the end of the year. At the same time, the US logistics company expects a further improvement in profitability. Specifically, revenue of around US$24 billion is expected, with an operating margin of 11 to 11.5 percent. Revenue of around US$89 billion is expected for the year as a whole. Everything indicates that the efficiency measures and the focus on higher-margin shipments are increasingly taking effect. UPS management confirmed its financial targets for 2025 as a whole.
Source: StocksGuide Ai
It continues to plan investments in infrastructure, technology, and automation in order to secure the long-term performance of the network. At the same time, returning capital to shareholders remains a central component of the strategy. In addition to stable dividend payments, share buybacks have also been implemented, while at the same time the obligations arising from the pension system are being met as planned.
Source: Sales and Margin forecast
Analysts' sales forecasts paint a picture of moderate, long-term growth overall. Following largely stagnant sales levels between 2024 and 2026, market observers initially expect a consolidation phase in which business will decline slightly or remain flat. This assessment reflects the current subdued demand in the parcel market and the strategic restructuring at UPS.
Source: Revenue estimates
However, analysts predict a significant recovery from 2027 onwards. Increasing sales growth is expected in the following years, accelerating noticeably by the end of the decade. However, the pace of growth is likely to remain modest, with mid-single-digit growth at most. This development is expected to be driven by a more stable global economy, renewed growth in international trade, and UPS's stronger focus on higher-margin shipments and integrated logistics solutions.
The dividend analysis shows that UPS is extremely attractively positioned from the perspective of income investors. The maximum score was achieved overall. There are reasons for this.
Source: Dividend Analysis
At 6.1 percent, the current dividend yield is very high compared to the market average and alone justifies the full score. The current yield is also significantly above the long-term average. For example, the average dividend yield over a ten-year period was only 3.5 percent. The strong increase to today's level is not primarily due to excessive dividend increases, but also to a lower share valuation. With a payout ratio of 69 percent for the last three years, UPS uses a large, yet healthy, portion of its profits for dividends. The ratio is high enough to deliver an attractive yield, while still leaving financial flexibility for investments, debt repayment, and share buybacks. Another factor contributing to stability is the uninterrupted dividend payment for ten years. This reliability is particularly important for long-term investors and demonstrates that the dividend is an integral part of the company's capital strategy. This stability, however, dates back to the IPO year of 1999. A dividend has been paid every year since the company went public. It has been increased without exception since 2003 – despite crises and cycles. Analysts believe this trend could continue.
Source: Dividend Analysis
Particularly compelling is the dividend growth over the past five years, averaging more than 10 percent annually. This demonstrates that UPS not only pays high dividends but has also been able to increase them dynamically – despite economic fluctuations and rising costs. Even with the current temporary headwinds, the dividend should remain secure for the time being.
The current valuation of UPS stock reflects a rather defensive, income-oriented investment profile. More value than growth. The expected price-to-earnings ratio is around 15, which is moderate, even though a short-term revenue decline of just over two percent is anticipated. This could already make the value high, and the stock expensive. Indeed, the enterprise value to free cash flow ratio, at 25, also shows that it is at a comparatively high level.
Source: Key metrics
The overall valuation signals that investors are willing to pay a premium for the quality and predictability of UPS's cash flows. At the same time, it also indicates that there is limited upside potential in the short term as long as revenue growth remains weak. The stock appears particularly attractive from the perspective of income investors. The dividend yield is significantly above the market average and is supported by a clear dividend policy. Since UPS continues to generate stable free cash flows and is committed to returning capital to shareholders, there is a good chance of further dividend increases, even in an environment of moderate growth. However, structural changes are needed in the long term. Greater profitability and higher free cash flows are required for the company's success story to continue into the next decade.
Source: StocksGuide Charts
However, the currently weak revenue growth is a key factor in the evaluation. Following the pandemic-driven boom, the parcel market is in a phase of normalization. Shipment volumes are declining, particularly in the US domestic market. Furthermore, the loss of Amazon, a major customer, is becoming increasingly noticeable. However, Amazon was never a high-paying customer, which means that profitability could even improve in the long term, despite the declining volume. Nevertheless, UPS must manage and compensate for this transition.
In any case, many investors value logistics companies heavily based on volume growth. Therefore, stagnant or declining revenues depress the valuation multiple, even if profitability remains stable. Added to this is UPS's cost structure. Due to high labor costs and long-term collective bargaining agreements, there is skepticism as to whether margins in the US business can sustainably increase significantly again. The market is therefore pricing in that a portion of earnings will remain structurally under pressure, leading to a more cautious valuation. Another factor is the company's ongoing transformation. Strategic restructuring, portfolio adjustments, and efficiency programs incur short-term costs and impair earnings transparency. Many investors are waiting until it becomes clearer how sustainable the improvements are, rather than accepting higher valuations now. Finally, the general market environment also contributes to the favorable valuation. In an environment of higher interest rates and Faced with more attractive alternatives, many investors prefer higher-growth or more technology-driven business models. This puts capital-intensive, cyclical companies like UPS under greater valuation pressure – even if they pay high and reliable dividends. For value investors, however, this can represent an opportunity, because UPS – as already discussed – possesses a competitive advantage.
UPS boasts a stable market position, reliable cash flows, and an attractive dividend policy. Despite short-term challenges in its US domestic business and slight revenue pressure, the company remains profitable and is well-positioned to benefit from global e-commerce. The high dividend yield, consistent dividend growth, and solid payout ratio make the stock particularly appealing to income investors who value predictability and long-term returns.However, the stock is not without risk. The biggest risks lie in the US domestic business, where declining shipment volumes and intense price pressure are squeezing margins. Added to this are high labor and operating costs, as well as volatile fuel prices, which further increase cost pressures. Furthermore, geopolitical developments, trade barriers, or supply chain disruptions could negatively impact international business. The Trump tariffs are also more likely to create headwinds than tailwinds. Finally, the dependence on large customers like Amazon also carries strategic risks, as changes in cooperation or increased competition could affect revenue and profitability. UPS itself, however, sees this as an opportunity to improve margins, since Amazon has never been a high-paying customer. Whether management's promise will actually be fulfilled remains to be seen.
Source: Target Price
Analysts are predominantly neutral to positive about UPS stock: 47 percent recommend buying, 44 percent recommend holding, and only nine percent recommend selling. The median price target of $106.08 is slightly below the current price of $108.06, indicating a potential downside of 1.8 percent over the next year.
Since the latest quarterly report showed a decline in business performance but didn't yet signal a clear trend reversal, it might be wise to wait and see. Setting up an alert with the Levermann Score as an additional indicator could be helpful. You'll automatically receive a notification if the strategy generates a buy signal.
The author and/or persons or companies associated with StocksGuide own or may own shares of UPS. This article represents an expression of opinion and does not constitute investment advice. Please note the legal information.