Is UPS Stock a Buy Right Now?

Key Points

• Parcel volume and revenue have fallen domestically as the company struggles to find its footing post-pandemic.

• UPS is in the midst of an efficiency plan that could save it billions although results are slow to materialize.

• Two growth sectors -- healthcare and B2B -- could help UPS transition to routes with higher margins.

• 10 stocks we like better than United Parcel Service ›

Investors in United Parcel Service (NYSE: UPS) have had little to cheer in 2025. Share prices are down almost 30% on the year, as daily package volume continues to slide domestically, and international trade (especially with China) has weakened significantly. UPS' stock has now lost more than half its value since hitting a closing high of $230 in early February 2022.

And things aren't getting easier for the brown box giant, either. Weaker discretionary spending, coupled with a cautious outlook for businesses during tariff uncertainty, have hurt regional demand for deliveries. The near-term situation looks so uncertain that management has withdrawn full-year 2025 guidance for the second quarter in a row.

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What's going on here, and can UPS turn this ship around? Yes, I think it can. But expect this year and next to be choppy. Here's what potential investors should know about this staple industrial stock.

Image source: Getty Images.

Why 2025 looks so rough

First, let's look at some recent numbers. Warning, UPS investors: This might hurt your eyes.

In the second quarter, domestic package volume fell 7.3% year over year, with residential deliveries dropping nearly 11%. Internationally, its key China-to-U.S. lane plunged almost 35% as tariffs and weak consumer demand hit that high-margin route hard. For a company that relies heavily on density per route to manage costs, that's a one-two punch.

UPS data by YCharts.

Looking at the chart above, you can see the disconnect that's been dogging UPS for years. Revenue has had some ups and downs, but is mostly flat, while net income has sagged slightly. Meanwhile, share price (purple) has dropped sharply since late 2022, a clear indication that investors aren't buying into the company's long-term stability without clear profit growth.

Zooming out, things don't look all that bad for the parcel market -- just not for UPS. Parcel volumes reached about $24 billion last year, an increase of 4% year over year, but competition with regional couriers and in-house delivery networks (aka Amazon Logistics) has siphoned away the e-commerce packages that once powered UPS' pandemic boom.

The trouble with getting lean

To keep up with this changing landscape, UPS is in the midst of a major network overhaul. Its plan, called Efficiency Reimagined, will depend less on manual labor and more on automation, potentially saving the company billions over a few years.

Included in this plan is the elimination of 20,000 jobs and the closing of 73 facilities. The net result is to reduce costs associated with a sprawling delivery network that's carrying far fewer packages today than it did at its pandemic peak.

So far, the plan has had mixed results. The company has closed facilities in 2025, but its second-quarter operating expenses were essentially flat year over year. Worse, its average cost per domestic package actually rose 5.6%, partly because it's taking longer to reduce head count than expected and partly because its lower-priced Ground Saver service added pressure.

All in all, it left U.S. domestic operating margin stuck at 7%, well below management's goal of 12% by 2026.

The long-term case for UPS

As I mentioned above, the near-term looks choppy for UPS. Revenue and net income are stagnating, while margins are thinning and competition from regional couriers is eroding its grip on e-commerce. And yet, when I look at the company today, I see two bright spots that deserve closer attention.

The first is its expansion into the healthcare sector. UPS has spent the past few years building a logistics platform for cold-chain shipments, specialty pharmaceuticals, and even cell and gene treatments. Since margins on healthcare shipments tend to be higher than your typical brown box, growth in this sector could offset the slowdown in consumer e-commerce.

The second is business-to-business (B2B) shipping. While home deliveries fell by double digits last quarter, B2B shipments slipped just 2.3%, showing how much steadier that side of the operation can be. UPS has leaned harder into small and mid-size business accounts, which tend to be stickier and more profitable than contracts with retail giants like Amazon. As it continues to prioritize higher-yield shipments, I would expect its B2B segment to become larger over time.

Don't get me wrong: I want to see results materialize from its efficiency plan before I become too bullish. But trading around 13.5 times forward earnings and yielding about 7.5% with its dividend, UPS is priced like a company in slow-motion collapse. That, to me, feels too pessimistic. The network reconfiguration will take time, but the cash flow is substantive and the healthcare and B2B segments give it optionality beyond e-commerce.

If you're expecting a sharp comeback this year, I would have to disagree. But if you have a multi-year horizon, and you believe today's headwinds are just moving air, today's price could mean buying the world's largest logistics network at a steep discount.

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Steven Porrello has positions in Amazon and United Parcel Service. The Motley Fool has positions in and recommends Amazon and United Parcel Service. The Motley Fool has a disclosure policy.