VALUATION HIGHLIGHTS

1. US Domestic Package (Next Day Air, Domestic Deferred Package, Domestic Ground Package) constitutes 68% of the Trefis price estimate for UPS's stock.
2. International Package (International Domestic Package, International Export Package, International Cargo) constitutes 22% of the Trefis price estimate for UPS's stock.
3. Supply Chain and Other Businesses constitute 10% of the Trefis price estimate for UPS's stock.

WHAT HAS CHANGED?

Latest Earnings: Q4 Fiscal Year 2025

UPS reported Q4 2025 revenue of $25.2 billion, a 2.1% increase year-over-year, driven by improved average daily volume in the U.S. Domestic segment. Adjusted EPS came in at $1.92, up 8.5% compared to the prior year, as productivity gains from the "Fit to Serve" initiative offset rising labor costs. Growth in the healthcare logistics sector and a rebound in e-commerce demand during the peak holiday season were the primary drivers for the quarter.

Note: UPS's FY'25 ended on December 31, 2025.

Network of the Future Consolidation

UPS has accelerated its "Network of the Future" initiative, a strategic pivot involving the closure of approximately 40 older sorting facilities to consolidate operations into automated "super hubs." This plan, backed by a $9 billion investment through 2026, aims to capture $3 billion in annual savings by 2028. By integrating advanced robotics and AI-driven route optimization, UPS is shifting its business model toward a lower-cost, high-density delivery architecture to better compete with non-unionized rivals and regional carriers.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of UPS's value that present opportunities for upside or downside to the current Trefis price estimate:

U.S. Domestic Package

• Volume Growth Recovery: UPS is targeting a return to mid-single-digit volume growth as it recaptures market share lost during previous labor negotiations. While Trefis estimates a steady 3% growth rate, an accelerated shift in B2B volumes could provide 150 basis points of upside to revenue projections.


• Operating Margin Expansion: The company aims for a 12% domestic adjusted operating margin by 2026. If automation efficiencies exceed current targets, there is significant potential for EPS to outpace current Trefis forecasts, despite the tail-end of the Teamsters contract cost increases.

For additional details, select a division from the interactive Trefis split for UPS at the top of the page.

BUSINESS SUMMARY

UPS operates as one of the world's largest package delivery companies, utilizing a hub-and-spoke network to provide integrated logistics services including small package delivery, freight forwarding, and supply chain management across more than 200 countries and territories.

SOURCES OF VALUE

The U.S. Domestic Package segment remains the primary engine of value due to its massive scale and high-margin specialized delivery services.

Logistics Infrastructure and Hub Density

UPS maintains a dominant market position through its "integrated-network" approach, where a single driver handles both air and ground packages. This density creates a significant moat by lowering the marginal cost of each additional stop, a structural advantage that is difficult for smaller competitors to replicate in the capital-intensive shipping industry.

Premium Healthcare Logistics Pivot

The company has successfully carved out a high-margin niche in healthcare logistics, specialized for cold-chain storage and time-sensitive pharmaceutical distribution. By acquiring companies like MNX Global Logistics and expanding its UPS Premier service, the firm has insulated a portion of its revenue from the volatility of general retail e-commerce.

KEY TRENDS

E-commerce Decentralization

The shift toward decentralized inventory management and "micro-fulfillment" is forcing a change in delivery patterns. UPS is positioning itself by investing in short-zone delivery capabilities and "SurePost" integration to handle the "last mile" more efficiently as shippers move products closer to the end consumer to meet faster delivery expectations.

Aggressive Cost Rationalization

To counter structural wage inflation, UPS is executing a massive corporate restructuring, including a reduction of 12,000 management positions and the disposal of non-core assets like its Coyote Logistics brokerage business. This strategy reflects a shift from "volume-at-any-cost" to a "better-not-bigger" philosophy, prioritizing high-yield parcels over low-margin residential bulk.