When most people think of United Parcel Service (UPS +0.17%), or UPS, they probably think of a brown truck that drops online orders by their door. And while "old reliable" is a good way to describe its package services, predictability has not been a way to describe its stock.
NYSE: UPS
Key Data Points
UPS is a company going through some immense changes, including higher labor costs and shifting e-commerce trends, and the share price reflects a good bit of that anxiety. At the same time, whenever a stock loses almost half its value over a five-year period -- as this one has -- investors have to wonder if something is structurally awry.
The transportation stock is down almost 24% on the year, as I write this. With that much value erased, should you buy UPS before 2026 starts, or hold off for more concrete results?
Image source: UPS.
Cheap and bruised, but still delivering packages
The story of UPS' downfall (and potential resuscitation) can be summed up like this: During the early days of the pandemic, UPS was thriving, as stay-at-home mandates forced consumers to shop online. The company's operating margin during that period was wide, driven in large part by surging package volumes.
UPS Net Income (Annual) data by YCharts
Then came a reality check: E-commerce spending cooled, while competitors in the delivery space -- like frenemy Amazon -- started taking market share away from UPS' former dominance.
As a result, UPS has had to implement a major cost-cutting strategy to help it regain some control over its diminishing margins. In practice, this means cutting jobs and closing factories, as well as cutting back on low-margin deliveries, i.e., Amazon packages.
This restructuring program has had mixed reactions from investors, but the results might already be surfacing. In its latest quarter, the company posted adjusted earnings per share (EPS) of $1.74, which soundly beat analysts' expectation of $1.30.
Since then, the stock has gained about 8%. To be sure, the company still has a long road ahead. But for value investors with a long-term horizon, the cost-cutting work it's done in 2025 could start to pay out in 2026 and beyond, and buying in the closing weeks of 2025 would make sense.
