United Parcel Service UPS is currently suffering from revenue weakness as geopolitical uncertainty and high inflation continue to hurt consumer sentiment and growth expectations. The weak demand scenario due to the economic slowdown has also led to a decline in the volume of packages shipped.
Average daily volumes on a consolidated basis declined 3.8% year over year in the first half of 2025. Driven by sluggish volumes, total revenues at UPS fell 1.7% year over year in the first six months of 2025. Volumes are expected to remain subdued at least in the near term. UPS’ decision, taken earlier this year, to trim the business with Amazon AMZN is likely to keep near-term volumes subdued. UPS’ management had reached an agreement in principle with Amazon to lower the latter’s volume by more than 50% by June 2026. According to Carol Tome, UPS’ chief executive officer, Amazon was not its most profitable customer. We expect the consolidated average daily volumes to decline by 9.4% in 2025 from 2024’s actuals.
The trade-related economic uncertainty adds to UPS’ woes. While releasing its second-quarter 2025 results, UPS did not unveil any revenue or operating profit guidance for 2025, citing macroeconomic uncertainty. Volatility is likely to persist in the U.S. stock market going forward due to uncertainty over the timing of the next interest rate cut, new tariffs and ongoing geopolitical tensions. This is likely to keep UPS’ top line under pressure for at least the rest of the year despite its cost-cutting efforts.
UPS’ rival FedEx FDX is also cutting costs to combat the weak demand scenario. FedEx reportedly will lay off more than 480 employees as it reshuffles operations through the Network 2.0 initiative. In the second quarter of 2023, FedEx announced DRIVE, a comprehensive program to improve its long-term profitability. The DRIVE program resulted in $1.8 billion in permanent savings in fiscal 2024. The program resulted in further $2.2 billion cost savings in fiscal 2025. These cost reduction initiatives include reducing flight frequencies, parking aircraft and cutting staff.
UPS’ Price Performance, Valuation & Estimates
Shares of UPS have declined in excess of 30% so far this year, underperforming its industry.
YTD Price Comparison
Image Source: Zacks Investment Research
From a valuation standpoint, UPS trades at a 12-month forward price-to-earnings ratio of 12.28X, nearly in line with industrial levels.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for UPS’ third-quarter 2025, fourth-quarter 2025, full-year 2025 and full-year 2026 earnings has been revised downward over the past 60 days.
Image Source: Zacks Investment Research
UPS’ Zacks Rank
UPS currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks Names #1 Semiconductor Stock
This under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028.
See This Stock Now for Free >>Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
FedEx Corporation (FDX) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
