UPS Stock Is Down 40% — Here’s Why That Might Actually Be the Point

Seeing a business like United Parcel Service trade where it does at the moment makes me feel a little uneasy. At about $103 per share, it is more than 40% below the peak it reached in February 2022, which was close to $193, if you recall that period of optimistic logistics during the pandemic. That figure sticks. The question of whether the worst is over is one that serious investors are beginning to ask again, and for good reason. However, what has happened since isn’t really a mystery.

The drop in UPS inventory wasn’t coincidental. Volumes fell precipitously after the pandemic delivery boom subsided. By 2025, daily package counts had dropped from over 25 million in 2021 to less than 21 million. Over the same period, revenue decreased from $97 billion to $88 billion. Furthermore, even tho it made long-term strategic sense, UPS made the conscious decision to lessen its reliance on Amazon by accepting fewer of those high-volume, low-margin fulfillment orders, which negatively impacted short-term financial results. Then came the costly and hard-won 2023 Teamsters contract, which increased labor expenses and further reduced margins. The entire cost was covered by the stock.

As we approach the second half of 2026, the changes are more subtle. Revenue increased to $22.83 billion in the company’s most recent quarterly report, up 7.6% from the previous year. The figure that keeps cautious investors on the sidelines is net income, which dropped dramatically to $604 million from $1.28 billion. However, a more nuanced picture is revealed by operating expenses that have risen to almost $21.9 billion. The union contract obligations and management’s declared goal to automate more of the logistics network over time are reflected in the $12.65 billion in compensation costs alone. These are the costs of transition. It is still genuinely unclear whether they resolve into margin expansion or continue to be a structural drag.

Some analysts believe that the market may be discounting UPS excessively. The stock’s intrinsic value was recently estimated by GuruFocus at $120.71, which is about 10% more than where shares were trading the previous week. The P/E ratio is approximately 19. For income investors, the forward yield of about 6.3% is real money, and the dividend announced at $1.64 per quarter for the September payment indicates that management does not intend to reduce it. That is not insignificant. In a rate environment where options aren’t as clear as they were a year ago, that’s actually pretty much.

One of the most powerful logistics companies in the world is still UPS. The infrastructure, which includes more than 500 aircraft, 100,000 vehicles, and deliveries to about 220 countries, doesn’t diminish simply because quarterly earnings fall short.

Over the last two years, the company has focused more on small-to-medium business clients and healthcare logistics, two markets with higher profit margins than bulk consumer fulfillment. Although the rebuild is taking longer than most investors would like to endure, there are genuine indications that it is succeeding. For the first time since 2022, UPS itself guided for revenue and adjusted EPS to grow together in 2026. This milestone may seem insignificant, but it makes sense when you consider that both metrics have been declining simultaneously for the past four years.

The analogy to FedEx is frequently made, and it’s important to take it seriously. The same post-pandemic hangover has been plaguing both businesses. Both are coping with an e-commerce environment that developed more quickly than anyone could have imagined. Maybe perception makes a difference. Under its own leadership changes, FedEx has experienced a more noticeable and significant cost restructuring. UPS’s reconstruction has been more subdued; CEO Carol Tomé recently met with India’s ambassador to the US to discuss prospects in the Indian economy, which at least implies the company is considering potential future sources of volume.

It’s difficult to ignore the fact that investors no longer discuss UPS when discussing industrial stocks. That might be the exact moment when these circumstances start to become intriguing.