Is UPS a Buy After Its Latest Earnings Report?

Shares of United Parcel Service (NYSE:UPS) rose nearly 5.8% on Oct. 27, the day of the company's third-quarter earnings report, after UPS delivered a beat-and-raise quarter.

The shipping giant reported adjusted earnings per share of $1.69, beating Wall Street consensus estimates by $0.06. Revenue of $22.9 billion topped expectations by over $600 million.

Additionally, UPS raised its full-year outlook, now expecting $92.6 billion in total revenue and an adjusted operating profit of roughly $8.75 billion. Previously, management had guided for $91.2 billion in total revenue and an adjusted operating profit of roughly $8.65 billion.

Is the stock a buy after its latest earnings report?

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Executing on the turnaround plan

In late 2024, UPS launched a turnaround plan called "Efficiency Reimagined," which focused on cutting costs, leaning into automation, and exiting low-margin businesses and entering higher-performing ones.

The company cut 48,000 jobs in 2025 and another 30,000 earlier this year, while also closing many of its facilities as well. UPS has also significantly reduced the amount of shipping it does for Amazon due to the many lower-margin packages it ships for the e-commerce giant.

Now, UPS is focusing on shipping for businesses that provide better margins, such as healthcare, small- to medium-sized businesses willing to pay higher rates, business-to-business, and complex industrial sectors like data centers.

UPS also recently announced a new global operating model in which the company will have a core standardized model across all its markets, while still providing teams with the flexibility to adapt to their local market needs.

"... These results show that our strategy is working," UPS CEO Carol Tomé said on the company's third-quarter earnings call. "We're driving more premium growth, improving revenue quality and mix, and creating greater operating leverage through a more efficient network. All of this is strengthening the underlying performance of our business."

In the quarter, UPS' U.S. domestic business grew revenue 4.5% year over year, while generating an operating margin of 6.1%. The international segment grew revenue 7.1% and had an operating margin of 14.9%. The company's smallest segment, supply chain logistics, grew revenue by over 18% and achieved an operating margin of 3.1% (9% on an adjusted basis).

UPS has benefited from the data center boom by shipping critical software, such as chips, that are often time-sensitive and, in some cases, require special care.

On the earnings call, Tomé sized UPS' logistics opportunities of data centers at $15 billion alone.

Is the stock a buy?

As seen in the market's reaction to the earnings report, Wall Street analysts are optimistic about UPS’ prospects.

Truist analyst Lucas Servera raised his price target on the stock by $5 to $120 per share and maintained a buy rating on the stock, noting that the recent results, as well as management's comments, give him confidence that the company can improve revenue, continue to make productivity gains, and improve margins next year.

With management having executed much of the turnaround so far, UPS's valuation has improved. But if the company continues to boost margins, the stock can continue to move higher over the long term.

UPS PE Ratio data by YCharts

Additionally, the stock has a very compelling trailing dividend yield of 6.25%. Projected dividends this year of $5.4 billion are covered by expected adjusted free cash flow of $6.1 billion.

UPS also hasn't cut its dividend since it went public in 1999, so management is likely to make every possible effort to maintain the dividend. For all of these reasons, I think investors can buy the stock right now.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends United Parcel Service. The Motley Fool has a disclosure policy.