Could 2026 Be a Turnaround Year for UPS Stock?
Key Points
United Parcel Service beat expectations in its most recent quarter.
The company is reducing the size of its "dilutive" Amazon deliveries, which should strengthen its margins.
The stock continues to trade at a modest earnings multiple.
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It's been a tough couple of years for logistics giant United Parcel Service (NYSE: UPS), better known as UPS. The company has been dealing with a slowdown in demand as the global economy faced challenges due to inflation. As a result, there hasn't been much growth or excitement around UPS stock. The last time the stock even generated a positive return for investors was in 2021.
In the past three years, the stock price has declined by 39%, while the S&P 500 index has soared by around 67%. But with such a significant drop in value over the years and with the company working on improving profitability and strengthening its margins, could 2026 be the year UPS stock finally takes off?
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Is the business moving in the right direction?
On Jan. 27, UPS released its year-end results for 2025, which showed some signs of progress. Its consolidated fourth-quarter revenue came in at $24.5 billion, slightly better than analysts' consensus expectations of $24 billion. Meanwhile, its adjusted per-share profit of $2.38 also easily surpassed the $2.20 earnings per share that Wall Street was looking for.
The company is in the midst of reducing the number of deliveries it handles for Amazon, which it says are "extraordinarily dilutive." The move may be controversial, but it should help UPS strengthen its margins, and that has been a key goal for CEO Carol Tome. Improving profitability can make the stock a more attractive value buy for investors down the road.
UPS stock is off to a strong start to 2026, and there's room for it to go far higher
As of Monday's close, shares of UPS were trading up 17% since the start of the year. And over the past six months, they've rallied by more than 37%. Although it's been a tough few years for the stock, with a focus on profitability and sustainable growth on both top and bottom lines, the stock is a much more attractive investment today than it was a year or two ago.
And despite its recent rally, the transportation stock still trades at a reasonable 15 times its estimated future earnings (based on analyst expectations). It can still go much higher, not only this year but over the long term. As a bonus, the stock also offers an attractive dividend yield of 6.2%. Overall, it makes for a terrific buy today.
Should you buy stock in United Parcel Service right now?
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David Jagielski, CPA 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.
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