This Brilliant High-Yield Industrial Stock Is Down 50%. Buy It Before It Sets a New All-Time High.

Source The Motley Fool

United Parcel Service (NYSE: UPS), more commonly called UPS, is one of the largest logistics companies on the planet. Despite the increasing need for its services in a world that is more digitally driven than ever, the stock has fallen 50% from highs in 2022. With a 5.6% dividend yield and a business that appears to finally be working from a position of strength, now is the time to consider adding this income stock to your portfolio.

What does United Parcel Service do?

UPS basically just moves packages from one place to another. That sounds so simple, but it is an incredibly complex process that requires a huge investment in a distribution network. This includes everything from the employees who hand you a package, to the truck they drive, to the sorting facility that the trucks come out of, to the airplanes and trucks that carried the package to the facility from another one.

Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »

And that doesn't even take into consideration the computer systems and automated sorting assets that track the package all along the way, ensuring that it gets safely to where it was meant to go in a cost-effective manner.

A delivery person holding a large pile of boxes that obscures their face.

Image source: Getty Images.

Replacing UPS would be very hard to do and certainly wouldn't happen quickly. The latest entrant into the delivery space is Amazon, which has spent years building out its last-mile logistics network. And it still considers UPS a valuable service provider. European companies that have tried to break into the U.S. market have basically ended up pulling back on the effort because they couldn't gain the scale needed to make it worthwhile.

UPS Chart

UPS data by YCharts

Why does Wall Street dislike UPS so much?

With an entrenched business like the one UPS operates, you would think investors would like UPS. But the stock is down a shocking 50% from its highs. There are two pieces to the story.

Most notably, Wall Street got overly enamored with delivery companies during the pandemic. As is so common, investors extrapolated what was a temporary event far into the future, basically assuming that nobody would leave their homes ever again. And, thus, everything would end up being delivered by a company like UPS. That didn't turn out to be true and UPS' business started to show some cracks as the world got back to normal and restrictions were lifted.

Those cracks were driven by an infrastructure network that needed an upgrade and the aforementioned growth of Amazon's own distribution network. UPS didn't shrink from the challenge, and embraced change. But that required selling entire business units and making tough choices, including rightsizing its network while at the same time investing in technology to increase its efficiency.

The company's financial statements didn't look so good for a little while and they were further complicated by the asset sales and a new, and more costly, union contract.

But the back half of 2024 was a key turning point, with volume growth and improved profitability. Notably, in the fourth quarter, revenue rose 1.5% and adjusted earnings rose 11%. Given that backdrop, it would seem like a solid choice to buy this turnaround stock as improved performance hints that it could start to chase its all-time highs again.

If only management hadn't announced that it was going to purposefully cut its Amazon relationship in half.

Don't get lost in the headlines with UPS

The change in the relationship with Amazon, UPS' largest customer, will create some near-term turbulence. But Amazon's business is low-margin and UPS is looking to become more profitable by focusing on higher-margin businesses. So the move makes sense. The timing is important, too, since it looks like UPS has turned the corner with regard to rightsizing its underlying business.

In other words, this actually looks like a decision being made from a position of strength. Choosing to shift away from Amazon now could turn out to be a brilliant decision, since Amazon would likely have kept pulling away from UPS anyway.

It looks like 2025 will be another year of change for UPS, which is clearly worrying investors. But the changes taking shape now are by choice, not by necessity, because the company has found its footing again. And that makes the lofty yield, backed by an entrenched and increasingly efficient business, worth a closer look. There's no telling when Wall Street will figure out that UPS is really working from a position of strength and start to love the stock again.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

  • Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $315,521!*
  • Apple: if you invested $1,000 when we doubled down in 2008, you’d have $40,476!*
  • Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $495,070!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

Continue »

*Stock Advisor returns as of March 14, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Bitcoin Drops Below $83,000 as US Government Transfers Over 10,000 BTC, Sparking Panic Over Potential Selling PressureUS government transfers over 10,000 BTC as Bitcoin extends losses to breach $83,000, but a further sharp decline remains unlikely.On October 8, Bitcoin (BTC) extended its recent losses, f
Author  TradingKey
16 hours ago
US government transfers over 10,000 BTC as Bitcoin extends losses to breach $83,000, but a further sharp decline remains unlikely.On October 8, Bitcoin (BTC) extended its recent losses, f
placeholder
Gold falls to a two-month low as real yields bite — can $4,000 hold?Gold hit a two-month low on 7 October, with spot touching roughly $4,090 and COMEX December futures closing at $4,140.70, even as the New York Fed's one-year inflation expectation rose to 3.9% — its highest since May 2023. The paradox resolves through real yields: the 30-year Treasury yield reached 5.732% intraday, its highest since 2002. Here are the levels, the institutional split, and the scenarios into tonight's jobless claims and 30-year auction.
Author  Irene Q.
16 hours ago
Gold hit a two-month low on 7 October, with spot touching roughly $4,090 and COMEX December futures closing at $4,140.70, even as the New York Fed's one-year inflation expectation rose to 3.9% — its highest since May 2023. The paradox resolves through real yields: the 30-year Treasury yield reached 5.732% intraday, its highest since 2002. Here are the levels, the institutional split, and the scenarios into tonight's jobless claims and 30-year auction.
placeholder
Gold Price Forecast: Gold Drops Below $4,100, Could Test $4,000 in Short TermAs of the Asian session on October 8, gold prices (XAUUSD) maintained a weak rebound trend today, with the latest price trading around $4,120; yesterday, gold prices briefly fell below $4
Author  TradingKey
16 hours ago
As of the Asian session on October 8, gold prices (XAUUSD) maintained a weak rebound trend today, with the latest price trading around $4,120; yesterday, gold prices briefly fell below $4
placeholder
Euro slides to a 17-month low as France's budget crisis spreads — can 1.12 hold?EUR/USD touched 1.1162 on 5 October, its weakest level in 17 months, as France's budget standoff pushed the 10-year OAT above 5% and the OAT-Bund spread to roughly 160bp — the widest since the 2011-12 eurozone debt crisis. The euro now trades near 1.1215 ahead of US jobless claims and a $22 billion 30-year Treasury auction. Here are the levels and the two scenarios to watch.
Author  Irene Q.
16 hours ago
EUR/USD touched 1.1162 on 5 October, its weakest level in 17 months, as France's budget standoff pushed the 10-year OAT above 5% and the OAT-Bund spread to roughly 160bp — the widest since the 2011-12 eurozone debt crisis. The euro now trades near 1.1215 ahead of US jobless claims and a $22 billion 30-year Treasury auction. Here are the levels and the two scenarios to watch.
placeholder
Today’s Market Recap: 10-Year Treasury Yield Hits Highest Since 2002,U.S. Stocks Fall as Brent Barely Holds $100Tracking the Market TrendTradingKey - On October 7, U.S. Eastern Time, the 10-year Treasury yield climbed to an intraday high of 5.36%, its highest level since 2002, while all three major U.S. stock i
Author  TradingKey
22 hours ago
Tracking the Market TrendTradingKey - On October 7, U.S. Eastern Time, the 10-year Treasury yield climbed to an intraday high of 5.36%, its highest level since 2002, while all three major U.S. stock i
goTop
quote