Here's Why United Parcel Service Stock Is a Buy Before Jan. 27

United Parcel Service (NYSE: UPS) stock is deeply unloved on Wall Street. The share price is down 53% from its 2022 highs, and the dividend yield is a well-above-market 6.1%. Yet the stock has risen nearly 30% over the past three months. Here's a look at what is going on, and why you might want to buy the stock before it next reports earnings on Jan. 27.

What does UPS do?

United Parcel Service, commonly referred to as UPS, is one of the largest package delivery companies in the United States. This seems like a fairly simple business in some ways, as you just have to pick up a box and then bring it to another location. However, package delivery is a complex logistical task that requires a huge infrastructure to be done successfully.

Image source: Getty Images.

The company's big brown box delivery trucks, pickup kiosks, and stores are the front-facing piece of the puzzle. Alone, those require huge capital investments to create and maintain. Behind them lies a vast network of distribution and sorting facilities, as well as transportation assets, including both trucks and airplanes. Managing it all is a complex computer system that tracks every individual package the company handles.

UPS' ability to deliver packages reliably and quickly is an achievement of a very high order. It would be extremely challenging to dislodge this industrial giant. In fact, even after years of building its own distribution system, e-commerce giant Amazon (NASDAQ: AMZN) still relies on UPS and is likely to continue doing so for years to come.

Things are changing at UPS

Amazon is actually quite important to the UPS story. Amazon is a high-volume customer for UPS, but the business has low profit margins. That's why UPS has proactively decided to reduce the number of Amazon packages it handles. This is all part of UPS' larger overhaul, an effort that has included exiting low-margin businesses, focusing on higher-margin businesses, and streamlining and modernizing its infrastructure.

Wall Street is clearly concerned about what UPS is doing, given the significant decline in its stock price since 2022. That makes sense, since the turnaround effort has involved spending more money at the same time that it is leading to lower revenue. Quarterly earnings results have been tough reading for a while.

If you dig just a little deeper than the headline numbers, however, there are positive signs of progress. For example, in the second quarter of 2025, the revenue per package in the company's core U.S. market rose 5.5%. That's exactly what you would expect to see based on what UPS is doing.

That result was followed up by a 9.8% increase in revenue per package in the third quarter of 2025. One quarter does not make a trend, but two quarters are very clearly the start of a trend. This is likely why UPS' stock price has been rising over the past three months.

It seems reasonable to expect that the fourth quarter will see another increase in the revenue per package. This would be a clear indication that UPS has navigated the worst of the turnaround effort and is starting to return to growth. If that's the case, further gains in stock prices seem highly likely.

Don't wait too long to buy UPS

UPS may not be a good fit for risk-averse investors. The yield is high for reasons, including the fact that the trailing 12-month dividend payout ratio is over 100%. There's a very clear risk that a dividend cut will take place. However, if you're a turnaround investor, it appears that UPS' business has started to turn for the better. The next earnings report could be the confirmation that Wall Street is looking for to kick the price rally into a higher gear.

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.