United Parcel Service (UPS) shares tumbled 15% at the cash open, marking the stock’s largest intraday decline in decades and putting it on track for its lowest level since July 2020. The selloff follows a dismal 2025 revenue forecast and news that the company plans to slash 50% of its shipping volume with Amazon by the second half of 2026.
What has fueled the decline in UPS shares is its agreement, in principle, with its largest customer, Amazon, to reduce shipping volume by more than 50% in the second half of 2026.
“We are making business and operational changes that, along with the foundational changes we’ve already made, will put us further down the path to becoming a more profitable, agile and differentiated UPS that is growing in the best parts of the market,” UPS Chief Executive Carol Tomé.
UPS said reconfiguring its network will save about $1 billion.
Evercore ISI analyst Jonathan Chappell told clients while the fourth-quarter results had some positives, the bears were more focused on the deal with Amazon.
“Even though the SurePost insourcing agreement was well known, though not clear on impact, the agreement with [Amazon] to reduce volumes by more than 50% in 18 months is a surprise and acceleration of the glide down of this business that has long represented a tail risk,” Chappell said.
Here’s a snapshot of fourth-quarter earnings (courtesy of Bloomberg):
Adjusted EPS $2.75 vs. $2.47 y/y, estimate $2.53
- EPS $2.01 vs. $1.87 y/y
Revenue $25.3 billion, +1.5% y/y, estimate $25.39 billion
US package revenue $17.31 billion, +2.3% y/y, estimate $17.24 billion
International package revenue $4.92 billion, +6.9% y/y, estimate $4.83 billion
Supply Chain Solutions revenue $3.07 billion, -9.7% y/y, estimate $3.35 billion
Average daily package volume 26.11 million, +0.9% y/y, estimate 26.47 million
Total package volume 1.62 billion, -0.7% y/y, estimate 1.65 billion
Average revenue per package $13.44, +2.5% y/y, estimate $13.33
Adjusted operating margin 12.3% vs. 11.2% y/y, estimate 11.5%
Total operating expenses $22.38 billion, -0.3% y/y, estimate $22.4 billion
2025 Forecast:
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Sees revenue about $89 billion, estimate $94.9 billion (Bloomberg Consensus)
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Sees adjusted free cash flow about $5.7 billion
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Sees capital expenditure about $3.5 billion, estimate $5.08 billion
Other analysts commentary (courtesy of Bloomberg):
JPMorgan analyst Brian Ossenbeck (neutral)
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Expects the stock to “materially underperform as the market digests the strategic and financial implications of the unexpected and accelerated glide-down of Amazon by 50%+ combined with the in-sourcing of the SurePost business”
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Adds that the execution risk and Amazon-related headlines will make UPS difficult to own even if the latest news is seen as a clearing event
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Expects FDX to be down in sympathy, but believes the implications are generally positive, as the largest competitor focuses more on margins and yields
Jefferies analyst Stephanie Moore (buy)
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Would look for additional information on the call regarding the strategic decisions and what specific actions will be taken to achieve the $1 billion saving target
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Says the magnitude of the premarket stock reaction is overdone
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“That said, the announcements today add to what has been a frustrating several years for investors,” Moore says
BMO analyst Fadi Chamoun (outperform)
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says lower Amazon volumes will drive significant re-alignment of US domestic network
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Says that while a planned reduction in low-margin business- to-consumer volumes and reduced reliance on Amazon are not negative by themselves, more details are required to assess the path for the US Domestic segment and the agreement surrounding the remaining 50% Amazon volumes
Goldman analyst (buy)
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Net, net however we think most focus will be on the 2025 Guide which calls for total revenue of $89bb or down 2% and in the context of three strategic initiatives: 1) agreeing with its largest customer (Amazon) to lower its volume at an accelerated pace by 2H26 (>50% reduction), 2) insourcing 100% of its UPS SurePost product (instead of USPS delivering a portion), and 3) a $1.0bn multi-year cost savings plan via reconfiguring the US network.
The question is whether the selloff is overdone…
Tyler Durden
Thu, 01/30/2025 – 10:50
