It has not been easy to own United Parcel Service (UPS 0.12%) over the past couple of years. The stock is still down more than 50% from its 2022 high. However, if management is correct, the troubling financial results that caused this decline could soon come to an end. Here's why smart investors are digging into UPS' turnaround right now.
UPS' turnaround has not been pretty
After the pandemic period at the turn of the decade, UPS decided it needed to reset its business. That included cutting costs and shifting toward its most profitable customers. Streamlining the business meant investing in new equipment, selling older assets, and reducing staff. All of these ended up increasing costs. Meanwhile, shifting toward more profitable customers meant cutting ties with less profitable customers, even including Amazon (AMZN +3.23%). That pushed the top line down even as costs rose.
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Needless to say, the industrial company's earnings statement has been ugly reading for a few years. The interesting thing here, however, is that there have been some green shoots springing up. Most notably, the company's revenue per piece in the U.S. market has been steadily increasing. The metric rose 7.1% in 2025. This is exactly what you would expect to see based on what UPS was doing.
UPS is telling investors that 2026 is the inflection point
UPS has provided investors with a mixed outlook for 2026. The first half of the year will continue recent trends. Essentially, revenues will continue to decline, and margins will remain under pressure. But, according to management, financial results are going to pick up in the second half of the year.
NYSE: UPS
Key Data Points
Management's expectation is that revenues will start to climb again and that margins will begin to strengthen starting in July. While the entire year will likely be flat compared to 2025, the second half of 2026 will mark the beginning of the upturn. And investors are likely to start rewarding UPS as those improvements start to show up in its financial reports. Buying before that could be a winning decision.
Keep an eye on UPS
With UPS' stock down so much, it seems like Wall Street has very low expectations. That suggests you can buy before the second half and then watch the third- and fourth-quarter results as they come in. If management falls short of its inflection call, the downside risk probably won't be material. However, if the business upturn occurs as projected, the upside could be huge.
