Time to Buy the Dip on United Parcel Service Stock?

Shares of United Parcel Service (NYSE: UPS) have recently pulled back after a rally in late 2025. It remains below its 2022 highs by a whopping 55%. And yet, the company is making material progress in its efforts to become a leaner and more profitable business. Here's why you might want to buy the dip.

What does UPS do?

United Parcel Service delivers packages. It is a highly capital-intensive business, and the industry has changed dramatically in recent years. UPS has been making big changes to adjust to the times, as it looks to slim down and focus on its most profitable business. That process has required investing in technology and infrastructure while simultaneously reducing staff and selling outdated or unneeded infrastructure. There are big upfront costs involved with these changes.

Image source: Getty Images.

UPS has also been purposefully adjusting its customer relationships. On the positive side, it has been leaning into sectors like healthcare, which have high margins. On the negative side, the company has been trimming its business with high-volume customers that provide it with only low-margin business. The biggest change was the company's pre-emptive move to reduce the number of packages it handles for Amazon (NASDAQ: AMZN). These changes support margins but reduce the company's top line.

You have to dig below the surface to see the positives at UPS

As UPS puts all the pieces together for a business turnaround, the big picture is actually kind of ugly. Higher costs and lower revenue aren't a great story. Not surprisingly, the company's financial statements haven't been pleasant reading. And yet, there are green shoots starting to appear.

For example, the revenue per piece in the United States has been growing (up 8.3% in the fourth quarter of 2025) even as the revenue in the U.S. segment has been falling (down 3.2%). That is exactly what you would expect to see given the company's goals and the steps it has taken and it is the continuation of what amounts to a positive trend.

The inflection point is just ahead, according to UPS

The company hasn't yet turned the corner, but management believes that will happen in the second half of 2026. That means that right now could be a good time to buy the stock, ahead of the point where the company's business starts to show more outward signs of a return to growth. The one caveat is the 6.4% dividend yield. The company is indicating the dividend is safe in 2026, but the payout ratio is hovering around 100%. Dividend investors might want to tread with caution.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and United Parcel Service. The Motley Fool has a disclosure policy.