United Parcel Service (UPS 0.98%), or UPS, isn't the market darling it once was during the pandemic. To put it in numbers, the stock has seen a 32% drop in price year to date and an abysmal fall of about 60% since its pandemic-era highs.
What's happening to the transportation stock is largely a reflection of its earnings, which have declined as labor costs have increased, margins have narrowed on weaker U.S. volumes, and tariff headwinds affect how the company does business.
Even so, performance at UPS could be gearing up for a turnaround. And it has everything to do with the high-margin clients that UPS is seeking.
Image source: Getty Images.
The one reason I'm keeping an eye on UPS -- healthcare logistics
Earlier this year, many UPS investors were shocked to hear that the brown box giant was walking away from its partnership with Amazon (AMZN 0.57%), historically one of its most high-volume accounts. The move away from Amazon, however, was strategic. Even if Amazon accounted for about 11.8% of UPS' revenue last year, Amazon packages have lower margins than those from other clients.
Besides -- over the last decade, UPS has been building up a healthcare logistics business that does more than just deliver sneakers. With its acquisition of Andlauer Healthcare in April 2025, along with a previous acquisition of Bomi in 2022, UPS now has the means to provide temperature-controlled solutions to customers around the world. Total healthcare revenue was $10.5 billion in 2024, with plans to take it to $20 billion by 2026.
The good thing about healthcare is that clients in this sector care more about reliability than penny-pinching. They're more likely to trust a logistics giant to deliver what could be extremely sensitive products than a competitor with less experience. For UPS, this could mean higher-margin deliveries on routes that have already been built into its global network.
Could healthcare really turn UPS around? With some help from other high-margin clients -- such as its business-to-business segment -- I think so. Given today's depressed price, momentum from healthcare could inspire investor confidence and shift the downward trajectory back up.
