Buy, Hold or Sell UPS Stock? Key Tips Ahead of Q2 Earnings

United Parcel Service (UPS) faces significant headwinds heading into its Q2 2025 earnings report on July 29, with consensus estimates projecting a 12.9% year-over-year EPS decline to $1.56 and a 4.4% revenue drop to $20.85 billion, primarily due to geopolitical uncertainties, high inflation, and reduced shipping volumes. In response, UPS is implementing aggressive cost-cutting measures, including offering driver buyouts for the first time in its history, aiming to reduce its workforce by 20,000 (4%) and close 73 facilities, partly driven by a strategic decision to cut unprofitable volume from Amazon by over 50% by June 2026. Despite potential tailwinds from lower fuel costs, the company's stock has underperformed, and its Earnings ESP suggests no beat, leading analysts to advise investor caution until Q2 results provide further clarity on near-term prospects.

Analysis

United Parcel Service faces a challenging near-term outlook, with consensus estimates for its second quarter projecting a 12.9% year-over-year decline in earnings per share to $1.56 and a 4.4% drop in revenue to $20.85 billion. These projections are driven by significant headwinds, including suppressed shipping volumes from geopolitical uncertainty, high inflation, and a slowdown in global manufacturing. In response, UPS is executing an aggressive restructuring plan, which includes cutting its workforce by 20,000 employees, closing 73 facilities, and offering driver buyouts for the first time in its history. A key driver of this restructuring is the strategic decision to reduce volume from its largest but least profitable customer, Amazon, by over 50% by June 2026. While a 10.3% expected decrease in fuel costs may provide some margin relief, the company's stock has underperformed, falling 26% over the past six months, lagging both its industry and rival FedEx. Predictive models, such as the negative Earnings ESP, and a Zacks Rank #4 (Sell) suggest an earnings beat is unlikely, compounding concerns over near-term performance and dividend sustainability.

Key Decisions for Investors

• Given the negative consensus estimates and significant operational restructuring, investors should consider holding off on new positions until the Q2 earnings report provides more clarity on the company's near-term trajectory and the impact of its cost-cutting measures.
• Monitor the upcoming earnings call for specific guidance on future margin profiles, particularly how the reduction in low-profit Amazon volume is expected to affect profitability.
• Given the stock's 26% underperformance and its valuation being in line with the industry but more expensive than its better-performing rival FedEx, investors may find more attractive near-term opportunities elsewhere in the transportation sector.
• Pay close attention to any commentary regarding the sustainability of the dividend, as softening demand and restructuring costs could present a risk.