United Parcel (UPS) AI Stock Analysis

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United Parcel

(NYSE:UPS)

72Outperform

UPS's overall stock score is bolstered by solid financial performance and optimistic strategic initiatives from the earnings call. While its valuation remains reasonable, technical analysis presents some caution due to mixed indicators. Continued focus on improving profit margins and strategic shifts in business operations are key to future performance.

Positive Factors

Cost Management

UPS rapidly cut costs, resulting in an adj operating margin of 12.3%, 80 bps above estimates.

Operational Strategy

Management is looking to utilize technology more efficiently to drive incremental value-added services and operating efficiencies through the 'Better and Bolder' strategy.

Revenue and Profitability

UPS reported a solid 4Q adj EPS, beating the street by 9% and our estimate by 5%, as margins exceeded expectations across the board.

Negative Factors

Earnings Impact

Tariff uncertainty and winter weather have led to a reduction in expected earnings per share for the first quarter.

Revenue Guidance

FY25 revenue is being guided to revenue of $89B, which falls significantly short of the street’s $95B estimate.

Volume Decline

Domestic volumes are expected to decline by 8% due to weather impacts and a slight freeze in demand ahead of increased tariffs.

United Parcel (UPS) vs. S&P 500 (SPY)

Market Cap

$79.88B

Dividend Yield6.77%

Average Volume (3M)6.55M

Price to Earnings (P/E)13.9

Beta (1Y)0.81

Revenue Growth0.16%

EPS Growth-13.41%

CountryUS

Employees254,360

SectorIndustrials

Sector Strength66

IndustryIntegrated Freight & Logistics

Share Statistics

EPS (TTM)6.76

Shares Outstanding733,686,700

10 Day Avg. Volume7,384,771

30 Day Avg. Volume6,545,433

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)1.08

Price to Cash Flow (P/CF)7.40

P/FCF Ratio7.40

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$126.28

Price Target Upside30.96% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering18

United Parcel Business Overview & Revenue Model

Company DescriptionUnited Parcel Service, Inc. provides letter and package delivery, transportation, logistics, and related services. It operates through two segments, U.S. Domestic Package and International Package. The U.S. Domestic Package segment offers time-definite delivery of letters, documents, small packages, and palletized freight through air and ground services in the United States. The International Package segment provides guaranteed day and time-definite international shipping services in Europe, the Asia Pacific, Canada and Latin America, the Indian sub-continent, the Middle East, and Africa. This segment offers guaranteed time-definite express options. The company also provides international air and ocean freight forwarding, customs brokerage, distribution and post-sales, and mail and consulting services in approximately 200 countries and territories. In addition, it offers truckload brokerage services; supply chain solutions to the healthcare and life sciences industry; shipping, visibility, and billing technologies; and financial and insurance services. The company operates a fleet of approximately 121,000 package cars, vans, tractors, and motorcycles; and owns 59,000 containers that are used to transport cargo in its aircraft. United Parcel Service, Inc. was founded in 1907 and is headquartered in Atlanta, Georgia.

How the Company Makes MoneyUPS makes money primarily through its extensive logistics and package delivery networks. The company's revenue model is centered around its three main business segments: U.S. Domestic Package, International Package, and Supply Chain & Freight. The U.S. Domestic Package segment generates revenue by delivering packages within the United States, leveraging a vast network of distribution centers and transportation assets. The International Package segment focuses on deliveries outside the U.S., capitalizing on global trade and the demand for cross-border shipping. The Supply Chain & Freight segment provides logistics and freight services, including transportation, distribution, and freight forwarding, catering to businesses' supply chain needs. Significant partnerships with large e-commerce companies, retailers, and businesses that require reliable shipping and logistics solutions also contribute to UPS's earnings. Additionally, the company benefits from advancements in technology and infrastructure investments that enhance operational efficiency and customer service.

United Parcel Financial Statement Overview

Summary

UPS maintains solid financial health with consistent revenue growth and efficient cash flow generation. While operational profitability shows potential for improvement, the balance sheet remains stable with manageable leverage. Overall, UPS is well-positioned for sustained financial performance, though improving net profit margins could enhance shareholder value.

Income Statement

Positive

UPS demonstrates strong revenue consistency with a slight revenue increase of 0.12% from 2023 to 2024. The gross profit margin improved significantly to 27.47% in 2024, indicating efficient cost management. However, the net profit margin declined to 6.35%, suggesting room for profitability improvements. The EBIT and EBITDA margins show stability at 9.30% and 11.19%, respectively.

Balance Sheet

Positive

The company's balance sheet reflects a moderate debt-to-equity ratio of 1.32, indicating manageable leverage. Return on equity declined to 34.57% in 2024, showing a decrease in profitability relative to shareholder equity. The equity ratio is relatively low at 23.86%, suggesting higher reliance on debt financing.

Cash Flow

Positive

UPS showcases strong cash flow management with a free cash flow growth rate of 22.31% in 2024. The operating cash flow to net income ratio is robust at 1.75, indicating healthy cash generation relative to net income. The free cash flow to net income ratio stands at 1.07, reflecting efficient capital expenditure management.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
91.07B	90.96B	100.34B	97.29B	84.63B
	Gross Profit
25.02B	17.23B	13.09B	12.81B	7.81B
	EBIT
8.47B	9.14B	13.09B	17.27B	2.64B
	EBITDA
11.92B	12.71B	17.00B	15.82B	10.37B
	Net Income Common Stockholders
5.78B	6.71B	11.55B	12.89B	1.34B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
6.32B	6.07B	7.59B	10.59B	6.32B
	Total Assets
70.07B	70.86B	71.12B	69.41B	62.49B
	Total Debt
22.02B	26.73B	23.52B	25.53B	27.75B
	Net Debt
15.90B	23.52B	17.92B	15.27B	21.84B
	Total Liabilities
53.33B	53.54B	51.32B	55.14B	61.74B
	Stockholders Equity
16.72B	17.31B	19.79B	14.25B	741.00M
Cash Flow		Free Cash Flow
6.21B	5.08B	9.34B	10.81B	5.05B
	Operating Cash Flow
10.12B	10.24B	14.10B	15.01B	10.46B
	Investing Cash Flow
-217.00M	-7.13B	-7.47B	-3.82B	-5.28B
	Financing Cash Flow
-6.85B	-5.53B	-11.19B	-6.82B	-4.52B

United Parcel Technical Analysis

Technical Analysis Sentiment

Negative

Last Price96.43

Price Trends

50DMA

111.21

Negative

100DMA

118.42

Negative

200DMA

123.27

Negative

Market Momentum

MACD

-5.26

Positive

RSI

36.53

Neutral

STOCH

42.35

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For UPS, the sentiment is Negative. The current price of 96.43 is below the 20-day moving average (MA) of 103.32, below the 50-day MA of 111.21, and below the 200-day MA of 123.27, indicating a bearish trend. The MACD of -5.26 indicates Positive momentum. The RSI at 36.53 is Neutral, neither overbought nor oversold. The STOCH value of 42.35 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for UPS.

United Parcel Risk Analysis

United Parcel disclosed 22 risk factors in its most recent earnings report. United Parcel reported the most risks in the “Macro & Political” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

United Parcel Peers Comparison

Overall Rating

UnderperformOutperform

Sector (63)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
EXPD	75 Outperform	$14.70B	18.67	35.12%	1.37%	13.98%	14.29%
ZTO	75 Outperform	$14.78B	12.62	14.46%	5.05%	12.67%	-0.16%
FDX	74 Outperform	$48.77B	12.78	14.74%	2.66%	0.34%	-8.45%
UPS	72 Outperform	$79.88B	13.93	33.99%	6.77%	0.16%	-13.41%
CHRW	68 Neutral	$10.62B	23.29	29.65%	2.75%	0.73%	41.65%
JBHT	65 Neutral	$13.29B	23.92	13.97%	1.34%	-5.79%	-20.32%
Sector *	63 Neutral	$4.29B	11.05	5.73%	232.30%	4.75%	-5.69%

* Industrials Sector Average

Performance Comparison

UPS

United Parcel

96.43

-39.35

-28.98%

CHRW

CH Robinson

91.14

21.70

31.25%

EXPD

Expeditors International

106.70

-6.53

-5.77%

FDX

FedEx

207.55

-53.96

-20.63%

JBHT

JB Hunt

129.23

-36.40

-21.98%

ZTO

ZTO Express

18.81

-0.45

-2.34%

United Parcel Earnings Call Summary

Earnings Call Date: Jan 30, 2025 | % Change Since: -26.89% | Next Earnings Date: Apr 29, 2025

Earnings Call Sentiment Positive

The earnings call reflected a positive outlook with strong financial performance, particularly in revenue, profit growth, and strategic segment expansions. However, challenges related to pension costs, key customer adjustments, and operational changes with USPS were noted. Despite these challenges, UPS is confident in its strategic initiatives and future growth prospects.

Highlights

Revenue and Operating Profit Growth

Consolidated fourth quarter revenue increased 1.5% to $25.3 billion, with operating profit rising 11.2% to $3.1 billion compared to last year. The consolidated operating margin was 12.3%, an increase of 110 basis points.

Strong Full-Year Financial Performance

For 2024, UPS achieved consolidated revenue of $91.1 billion, operating profit of $8.9 billion, and generated $10.1 billion in cash from operations, returning $5.9 billion to shareholders.

Growth in SMB and Healthcare Segments

SMBs made up 28.9% of total U.S. volume, a 30 basis point increase. The digital access program generated $3.3 billion in global revenue, a 17% increase year-over-year. Healthcare logistics business expanded with acquisitions and new facilities.

Efficiency and Automation Initiatives

UPS equipped 66% of its fleet with sensors, eliminating 12 million manual scans per day. 63% of U.S. volume now flows through automated facilities, up from 60% last year.

Lowlights

Non-Cash Pension and Impairment Charges

GAAP results included a non-cash after-tax mark-to-market pension charge of $506 million, asset impairment charges of $46 million, and other costs totaling $639 million.

Challenges with Largest Customer (Amazon)

Reached an agreement to reduce Amazon's volume by more than 50% by 2026 due to diminishing returns. This will result in lower revenue but a shift towards higher-margin business.

Impact of USPS Service Changes

UPS stopped using USPS for SurePost due to increased costs and potential service deterioration, insourcing 100% of SurePost volume. This was driven by USPS changing its operating model.

Company Guidance

During the UPS Fourth Quarter 2024 Earnings Conference Call, several key financial metrics and strategic updates were discussed. For the fourth quarter of 2024, UPS reported a consolidated revenue increase of 1.5% to $25.3 billion, with operating profit rising 11.2% to $3.1 billion, resulting in a consolidated operating margin of 12.3%. The U.S. domestic segment's operating margin exceeded 10%, while international operating margin was 21.6%. For the full fiscal year, UPS achieved a consolidated revenue of $91.1 billion and an operating profit of $8.9 billion, with an operating margin of 9.8%. Cash generated from operations totaled $10.1 billion, with $5.9 billion returned to shareholders through dividends and share repurchases. Guidance for 2025 includes a projected revenue of approximately $89 billion and an operating margin of 10.8%. UPS highlighted strategic changes such as transitioning all SurePost deliveries in-house, aiming to generate $1 billion in savings through Efficiency Reimagined initiatives, and reducing Amazon-related volume by 50% by 2026 to improve profitability, with expectations of a U.S. domestic operating margin of at least 12% by the fourth quarter of 2026.

United Parcel Corporate Events

Executive/Board ChangesBusiness Operations and Strategy

UPS Appoints Kevin P. Clark to Board of Directors

Positive

Mar 3, 2025

On March 3, 2025, UPS announced the appointment of Kevin P. Clark, Chairman and CEO of Aptiv PLC, to its Board of Directors, increasing the board size to thirteen members. Clark’s expertise in finance, technology, and industrial transformation is expected to enhance UPS’s strategic areas, particularly in healthcare and technology, as he joins the Audit Committee following the 2025 Annual Meeting of Shareowners.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.