Why UPS Stock Just Dropped

United Parcel Service (NYSE: UPS) stock fell 4.2% through 11 a.m. ET this morning, despite beating analyst forecasts in its Q1 report this morning.

Heading into the report, analysts expected UPS to earn $1.03 per share on $21 billion in quarterly sales. In fact, UPS earned $1.07 per share, adjusted for one-time items, on sales of $21.2 billion.

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UPS Q1 earnings

Not all the news was good. U.S. and supply chain revenue both declined year over year, by 3% and 6%, respectively, with only international revenues rising (about 4%). Total revenue slipped 1%.

Earnings per share took a bigger hit. Although UPS beat pro forma estimates, earnings calculated under generally accepted accounting principles (GAAP) were a nickel under non-GAAP earnings -- $1.02 per share -- and that was down more than 27% year over year!

CEO Carol Tomé pooh-poohed the decline, however, arguing that while the results might not be pretty, "the first quarter of 2026 marked a critical transition period for UPS ... [which is now] behind us." Going forward, UPS expects to resume growing.

What's next for UPS?

It even expects to grow a bit faster than Wall Street is looking for. Turning to guidance, UPS forecasts $89.7 billion in sales this year, up 1% from 2025 sales. Management did not provide GAAP earnings guidance, but said its full-year "adjusted operating margin" should be 9.6% -- a sizable improvement from the 6.1% margin recorded in Q1.

If UPS hits those marks, it should meet or beat analyst forecasts for a $7.05-per-share GAAP profit this year. On a $104 stock, that works out to a forward P/E ratio of less than 15. For a turnaround that's growing sales again, expanding margins, and paying a 6.1% dividend yield, that sounds pretty cheap to me.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends United Parcel Service. The Motley Fool has a disclosure policy.