UPS‘ (NYSE: UPS) The last fourth quarter profit report was massive. The numbers were not the last quarter of 2024 as much as it was specifying the strategic changes she was carrying out for her business. The market did not admire the update much, which led to a sharp decrease in the stock. At the time of this report, 9.4 % decreased in 2025.
However, the changes are in line with the philosophy of management, and there is a strong condition for the argument that stocks are an excellent value at the present time. Here is the low.
Let’s start looking at the changes announced by UPS. CEO Carroll Tommy said the changes were necessary, because UPS may “lose momentum” in the United States unless three specific challenges dealt with:
The slow handover market in the United States has slowed down with “changing the characteristics of the package” – in fact, exaggerating the estimate of UPS administration in the American Small Packs market over the past two years
Excessive dependence on its largest customer, Amazon.com(Nasdaq: amzn) Amazon was responsible for 11.8 % of the company’s total revenues in 2024
Dependence on US Post Service (USPS) on UPS Surepost (low cost, lower connection sooner)
The administration decided to take proactive measures on these “challenges” in two ways. First, I agreed with Amazon to gradually reduce delivery sizes until they had 50 % of their current size by the second half of 2026. As mentioned above, Amazon is a major customer, and this means a significant decrease in size and revenue from E -commerce a company.
Second, UPS will currently bring the delivery processes by USPS at home.
These changes can be observed immediately in the 2025 instructions for the entire year, as the administration expects a decrease in revenue (fewer Amazon deliveries) but a higher operating margin and higher operating margin higher in the American local package sector. Consequently, the administration expects to improve the modified operational profit because it enacted the strategic change to control its network away from the lower margin delivery processes and reap the benefit of the positive transformation in the margin.
UPS instructions
2024
2025 (IS)
profit
91.1 billion dollars
89 billion dollars
Unjustified operating profit margin
9.8 %
10.8 %
Understanding an implicit operating margin other than the principles of acceptable accounting in general*
8.9 billion dollars
~ 9.6 billion dollars*
Data source: UPS offers. GAAP = acceptable accounting practices in general. *The author’s account.
In theory, at least, the plan is logical, but the market sold the shares over the news, and many Wall Street analysts reduced their price goals. The reason behind both lines is likely to doubt the implementation of UPS plans to reduce the Amazon delivery sizes simultaneously and reduce costs in its network. CFO Brian Dykes promise more colors about the problem in the profit call in the first quarter in a few months, but investors have a reason for caution, while giving UPS implementation over the past two years.
Photo source: Getty Images.
However, most UPS problems in recent years have come from a mixture of delivery of a small small package from the United States and the prolonged and expensive employment in 2023.
Moreover, there are clear indications that UPS improves its basic business. Its three -year transformational plans on the investor day last year include a continuous focus on expanding delivery in targeted areas such as SMBS and health care, while investing in enhancing productivity (automation and smart facilities) to enable them to unify assets.
Early results were encouraging. SMB volume increased as a share of the US size to 28.9 % in 2024 from 28.6 % in 2023, driven by 17 % in the digital access program. The administration expects an increase of up to 32 % in 2025. The size associated with health care has grown by 5 % to $ 10.5 billion in 2024 and aims to reach $ 20 billion by 2026. In smart and mechanical facilities.
Moreover, it was previously discussed, One of the main standards to follow up with UPS It is a spread between its revenues for each piece (RPP) and its cost for each piece (CPP) in the US local package. For the second quarter in a row, UPS reported a favorable result.
Us US Sister local
First quarter 2024
The second quarter 2024
The third quarter 2024
The fourth quarter 2024
Revenue for each piece
(0.3 %)
(2.6) %
(2.2) %
2.4 %
The modified cost of each piece
4.1 %
2.5 %
(4.1) %
0.9 %
Spread
(4.4 pp)
(5.1 pp)
1.9 pp
1.5 pp
Data source: UPS offers. pp = percentage points.
Focusing on upper marginal delivery instead of chasing the delivery volume lies in the heart of the UPS approach “is better, not larger”, and the plan to reduce the low -margins Amazon delivery sizes have an ideal meaning. Meanwhile, UPS shows the basic progress in its strategic goals (SMBS, healthcare, “future network”) and the development of the RPP/CPP spread, which indicates confidence that it can reach its goals.
Photo source: Getty Images.
Although there is no guarantee that UPS will succeed in lowering the size of the Amazon sizes and lowering the costs smoothly in this process, the price rate to the profits amounting to 14.1 times and a profit return of 4.9 % gives a good margin of safety, and the shares seem to be an excellent value probability .
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*The stock consultant dates back from February 3, 2025
John Maki, former Chole Foods Market, a affiliate company, a member of the Motley Fool Board of Directors. Lee Samz He has no position in any of the mentioned stocks. Motley Fool has positions in Amazon and recommends it. Motley recommends a United Part Lie. Motley deception has Disclosure.
