Here's Why Some Investors Think This Stock's Best Days Are Still Ahead

United Parcel Service (NYSE: UPS), commonly known as UPS, is deeply unloved on Wall Street. The stock has lost more than half its value since hitting a high in early 2022. A big piece of the story is management's decision to revamp the business. Here's why investors are worried and why some investors think UPS' best days are still ahead.

UPS' big problem

During the coronavirus pandemic, demand for UPS' package delivery services was high. When social distancing ended, however, people returned to shopping in physical stores. E-commerce didn't go away, but the reduction of the health scare did dramatically change UPS' demand picture. Management decided it was time for a business overhaul to prepare for the future.

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Essentially, the company is making capital investments in technology so it can operate more efficiently. That has allowed it to reduce staff and dispose of assets, like distribution facilities. The company is also refocusing on its most profitable customer groups, a move that has included limiting its relationship with low-margin customers like Amazon. So more spending and less revenue, which has resulted in some pretty ugly financial statement results when quarterly earnings come around.

Look underneath the headline numbers

The big story here, however, is that revenue and earnings pressures are to be expected based on what the company is doing. The key is to look at what has been achieved. For example, in the second quarter of 2025, revenue per piece delivered in the company's U.S. business rose 5.5% despite a 0.8% drop in the division's overall revenue. That's what you would expect to see.

The outcome was followed up by a revenue-per-piece jump of 9.8% in the third quarter, despite a 2.6% revenue drop in the U.S. business. The recently released fourth-quarter results show a continuation of what can now be called a trend, with revenue per piece up 8.3% even though the U.S. division's overall revenue fell 3.2%.

Important progress is being made

Essentially, United Parcel Service is improving its profitability even as it shrinks its business. That is exactly what this turnaround effort is intended to achieve. That's why many investors believe that UPS' best days may still lie ahead. If you can see the green shoots taking shape, you may want to consider buying the stock. The one caveat is that the dividend payout ratio is hovering around 100%, which suggests that dividend lovers attracted by the 6.3% yield should probably 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.