Key Stats for United Parcel Service Stock
- 30-Day Performance: 12%
- 52-Week Range: $82 to $124
- Valuation Model Target Price: $142
- Implied Upside: 19%
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What Happened?
United Parcel Service stock is up about 12% in the last 30 days, recently trading near $119 per share as investors responded to fourth quarter results and improved forward visibility.
The rebound follows months of pressure tied to Amazon volume reductions, shifting trade lanes, and margin compression from network restructuring.
Shares strengthened after UPS reported fourth quarter revenue of $24.5 billion, operating profit of $2.9 billion, an 11.8% operating margin, and adjusted EPS of $2.38, with CEO Carol Tomé stating the quarter “exceeded our expectations” on strong revenue quality and cost discipline.
The stock had previously faced selling pressure as U.S. average daily volume declined and management outlined first-half 2026 margin headwinds from the Amazon glide-down, Ground Saver transition, and aircraft replacement expenses.
However, investors focused on $3.5 billion in 2025 cost savings, confirmation that Amazon volume was reduced by about 1 million pieces per day as planned, and 2026 revenue guidance of approximately $89.7 billion with a 9.6% operating margin, signaling a clearer path toward second-half earnings improvement.
Institutional positioning reinforced sentiment. State of New Jersey Common Pension Fund D increased its stake by 3.8% to 253,718 shares worth about $21.19 million, while Varma Mutual Pension Insurance Co raised its position 9.0% to 112,970 shares valued at roughly $9.44 million.
CIBC World Market boosted its holdings 111.2% to 137,376 shares worth about $11.48 million, and Norges Bank initiated a sizable new position of approximately $852 million.
Although some firms trimmed exposure, institutional ownership remains about 60.26%, indicating continued long-term participation.
The stock’s 12% move over the last month reflects a shift from concern about near-term margin pressure toward confidence in cost normalization and automation-led efficiency gains.
Investors are now focused on whether second-half 2026 margin expansion can translate into sustained earnings recovery.
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Is United Parcel Service Undervalued?
Under valuation assumptions, the stock is modeled using:
- Revenue Growth (CAGR): 2.6%
- Operating Margins: 10.3%
- Exit P/E Multiple: 14x
Revenue expectations align with management’s 2026 guidance of approximately $89.7 billion and reflect gradual expansion supported by pricing discipline and improved mix rather than a sharp rebound in global shipping demand.
The outlook assumes stabilization in U.S. domestic package trends and continued revenue per piece growth in the mid-single-digit range.
Margin recovery carries more weight than top-line acceleration. Management is targeting $3 billion in additional cost savings in 2026 tied to the Amazon glide-down and network reconfiguration, while expanding automation across facilities where cost per piece is approximately 28% lower than in conventional buildings.
As more volume flows through automated hubs and driver staffing aligns with lower stop density, cost per piece is positioned to normalize below revenue per piece growth, supporting operating leverage.
Additional drivers include higher SMB penetration, growth in health care logistics, improved economics from shifting Ground Saver deliveries to the USPS, and easing year-over-year trade comparisons in the second half of 2026. These developments strengthen revenue quality even if macro demand remains modest.
Free cash flow durability supports the $6.56 annual dividend, which yields 5.50% at current prices.
Based on these inputs, the model estimates a target price of $142, implying about 19% total upside and a 6.2% annualized return, indicating the stock appears undervalued at current levels.
At current prices, UPS appears undervalued, with 2026 performance likely driven by margin normalization, automation efficiency gains, disciplined pricing, and improved shipment mix rather than aggressive revenue acceleration.
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