United Parcel Service, Inc (UPS): what the price assumes

In the published model solve dated 2026-Q2, anchored at $105.33, United Parcel Service, Inc (UPS) is priced for +0.4% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-28.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/UPS

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 7.5% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is justified by relative-multiple; asset-based/earnings-power/growth-DCF land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Relative Families that call it expensive: Asset, Earnings, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.0%); the inversion above states its own rate.

Per-Model Detail (n=15)

Economic-Unit Decomposition (Sum Of The Parts)

The disclosed units share an operating capital structure; consolidated cash-flow lenses remain coherent and the unit split is explanatory.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• UPS is deliberately shrinking to grow margins: it is cutting volume from its largest customer, telling investors in its 10-K it expects that customer's volume to decline to approximately 50% of year-end 2024 levels by mid-2026 as it shifts toward higher-yielding packages.
• The transition is costly in the near term: Q1 2026 revenue fell to $21.2 billion, operating margin dropped to 6.0% from 7.7%, and GAAP diluted EPS fell to $1.02 from $1.40 as restructuring costs hit.
• The number to watch is the dividend against free cash flow: UPS guided to roughly $6.5 billion of free cash flow in 2026 against a planned $5.4 billion dividend payout, a tight coverage that leaves little room if cash flow slips.

Bull Case

The balance sheet is what gives UPS room to run its transformation, and it is stronger than the headline volume declines suggest. The company carries net debt of about $19.9 billion, roughly 2.7 times operating income, with interest coverage near 7 times, a manageable load for an asset-heavy logistics network with stable, contracted freight flows. That capital structure matters because UPS is choosing to absorb large near-term costs, $1.3 billion to $1.5 billion of transformation spending in 2026 including about $1.2 billion for the Driver Choice separation program, in pursuit of a leaner, higher-margin network. A company with covered interest and steady cash generation can fund a multi-year restructuring without the financing strain that would force a leveraged competitor to abandon the plan halfway.

The strategic logic behind shedding volume is sound even if the optics are ugly. UPS is deliberately reducing its largest customer's volume to roughly half of 2024 levels by mid-2026, because that volume carried thin margins, and it is, in its own words, making a deliberate shift in our business to increase our focus on growing higher yielding volume. Trading low-yield packages for high-yield ones shrinks revenue but should lift profitability per piece. The cost program is already showing: UPS captured $600 million of network-efficiency savings in the first quarter alone, on a path toward $3 billion in year-over-year savings in 2026. If those savings land and the remaining volume is genuinely higher-yielding, the margin recovers even on a smaller base.

The returns the franchise can earn when it runs well are the reason to believe in the recovery. Return on equity sits near 33%, and the company reaffirmed a full-year 2026 target for a non-GAAP adjusted operating margin of 9.6%, above the depressed levels of the transition quarters. The price at about $105 sits below where the relative-multiple methods land, so the market is not paying a premium; it is pricing in the transition pain. The bull case is that a financially sturdy network is taking deliberate short-term losses to reset its margin structure, and the cost savings plus the higher-yield mix get it back to the profitability it has demonstrated before.

Bear Case

The structural truth a UPS holder has to sit with is that the company is shrinking on purpose, and shrinking is hard to value. Revenue is falling, not because UPS lost a competitive fight, but because it is choosing to walk away from its largest customer's volume, cutting it to roughly half of 2024 levels by mid-2026. The bet is that the lost low-yield volume is replaced by higher-yield volume fast enough to lift margins. But Q1 2026 showed the cost of the transition arriving before the benefit: revenue fell to $21.2 billion, average daily package volume dropped 7.7%, operating margin compressed to 6.0% from 7.7%, net income fell 27% to $864 million, and GAAP diluted EPS dropped to $1.02 from $1.40. The plan can work, but the window where revenue is gone and the replacement has not arrived is exactly the window the company is in now.

The dividend is the pressure point, and the math is tight. UPS guided to roughly $6.5 billion of free cash flow in 2026 against a planned dividend payout of about $5.4 billion. That leaves a thin cushion of about $1 billion to cover everything else, including the transformation costs, in a year when operating profit is depressed. A dividend that consumes the large majority of free cash flow during a margin trough is a fixed claim that the market watches closely, and any further volume or margin disappointment narrows the coverage toward the line. A logistics company defending a large payout through a self-imposed revenue reset is carrying a risk the price has to weigh.

The valuation reflects a business in flux. On trailing earnings the asset, earnings-power, and growth methods all land below the price, with normalized earnings power near $104 (June 28, 2026) and the perpetual-growth cash-flow method, fed by the negative recent growth, landing near $57. Only the relative-multiple methods reach above the price. The price is paying for the margin recovery the company is targeting, not for what it earns today, and the recovery depends on two things happening together: the cost savings landing and the higher-yield volume materializing. The peer comparison is essentially FedEx, the one direct competitor of scale, which is running its own efficiency program, so neither can lean on the other being weak. The bear is not that UPS is failing. It is that the company is mid-surgery, the dividend is tight, and the price already credits a clean recovery the transition quarters have not yet shown.

Valuation

The price is making a modest bet, which is the first thing to note about a stock the static methods call expensive. Inverting today's price near $105 implies operating growth under 2% a year on an operating margin near 2.9%, far below the 8.5% the business earns even now and the 9.6% it targets. In other words, the price does not require a return to peak; it requires the transition not to permanently impair the franchise. That framing matters because the trailing-earnings methods, run during a margin trough, understate what a recovered UPS earns.

The methods sort around the transition. The asset-based methods land below the price, with the simple excess-return method near $67 against a thin book value of $18.54 a share, though the two-stage version reaches $134 once it credits the high return on equity. The earnings-power methods land near $67 to $104, with normalized earnings power right around the current price at $104. The growth methods land low, near $57 to $95, dragged down by the negative recent revenue trajectory that the perpetual-growth model extrapolates. Only the relative-multiple methods sit above the price, with the EV/EBITDA-relative approach near $174 and the sector price-to-earnings method near $149. So the price is defended by peer multiples and called full by the methods anchored to today's depressed cash flow. The honest read is a business priced for its margin to recover toward the targeted level, not for the trough to be permanent.

Solvency is the swing factor, and it is where the bull and bear cases meet. Net debt of about $19.9 billion is 2.7 times operating income with interest coverage near 7 times, sturdy enough to fund the restructuring, but the dividend tightens the picture: a planned $5.4 billion payout against roughly $6.5 billion of guided free cash flow leaves little slack during the transition. The downside is bounded by a covered balance sheet and a recoverable margin; it is amplified by the fixed dividend claim landing in a low-cash-flow year. What the buyer is underwriting is that the cost program delivers and the higher-yield volume replaces what UPS is deliberately giving up, fast enough to restore both the margin and the dividend's comfortable coverage.

Catalysts

The defining catalyst is the Amazon volume glide-down, now in its final stretch. UPS is reducing its largest customer's volume to roughly half of 2024 levels by mid-2026, and Amazon represented about 10.6% of consolidated 2025 revenue, so the reduction is a deliberate and significant revenue event the company has telegraphed for over a year. The Q1 2026 report showed the effect: revenue of $21.2 billion, average daily package volume down 7.7%, and net income down 27% to $864 million, with operating margin falling to 6.0% from 7.7% as restructuring costs landed.

The cost and restructuring programs are the offsetting catalysts. UPS expects $1.3 billion to $1.5 billion of transformation-related costs in 2026, including about $1.2 billion for the Driver Choice separation program, and captured $600 million of network-efficiency savings in the first quarter on a path toward $3 billion of year-over-year savings in 2026. For the full year, the company reaffirmed consolidated revenue of about $89.7 billion and a non-GAAP adjusted operating margin target of 9.6%.

The catalysts to watch are the quarterly operating-margin prints, which show whether the cost savings are outrunning the volume loss, the revenue-per-piece trend that signals whether the higher-yield shift is working, and the free-cash-flow-to-dividend coverage, since the payout is the most-watched fixed claim through the trough. The completion of the Amazon reduction around mid-2026 is the inflection point after which the revenue base stops shrinking from that source and the underlying margin trajectory becomes the clean signal.

Peer Cohorts (Per Segment, With Filing Citations)

U.S. Domestic Package (reported)

• FDX (FedEx Corporation)
• FY2025 10-K: …offerings as a result of strengthening e-commerce. U.S. ground home delivery/economy package volume increased 5% in 2025, also primarily due to strong growth in e-commerce. U.S. deferred package volume increased 4% in 2025 primarily due to mix shift toward our deferred service offerings. International and U.S.…
• FY2025 10-K: …for Federal Express. In addition, Federal Express works with FedEx Logistics to secure air charters and other cargo space for U.S. customers. Billings for such services are based on negotiated rates and are reflected as revenue of the billing segment. These rates are adjusted from time to time based on market…
• SNDR (Schneider National, Inc.)
• FY2025 10-K: 1, 2011, as amended as of December 17, 2013, as amended and restated as of September 5, 2018, and as further amended on July 30, 2021, among Schneider Receivables Corporation, as seller, Schneider National, Inc., as the servicer, Wells Fargo Bank, N.A., as administrative agent, and the purchasers party thereto 8-K…
• FY2025 10-K: …22, 2024, among the Borrower, the Guarantors, the lenders party thereto and Bank of America, N.A., as administrative agent. 8-K 10.1 001-38054 11/25/2024 80 Table of Contents 10.47 Amendment No. 6, dated August 25, 2025, to Amended and Restated Receivables Purchase Agreement dated as of March 31, 2011, as amended and…
• ODFL (OLD DOMINION FREIGHT LINE, INC.)
• FY2025 10-K: 0.4* Third Amendment to the 2006 Nonqualified Deferred Compensation Plan of Old Dominion Freight Line, Inc. (Incorporated by reference to the exhibit of the same number contained in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed on May 7, 2015) 10.20.5* Fourth Amendment to the…
• FY2025 10-K: …Report on Form 10-Q for the quarter ended June 30, 2025, filed on August 6, 2025) 10.27* Form of Old Dominion Freight Line, Inc. 2025 Stock Incentive Plan Restricted Stock Award Agreement (Non-Employee Directors) (Incorporated by reference to the exhibit of the same number contained in the Company's Quarterly Report…
• SAIA (Saia, Inc.)
• FY2025 10-K: …to 66 10 percent of annual wages. The ESPP allows highly compensated employees as defined by Section 401(a)(17) of the Internal Revenue Code to make payroll deductions of up to 20 percent of annual wages to purchase common stock of the Company. The custodian uses the funds to purchase the Company's common stock at…
• FY2025 10-K: 10-K false 0001177702 --12-31 FY one day three years http://fasb.org/us-gaap/2025#OperatingLeaseLiabilityNoncurrent http://fasb.org/us-gaap/2025#OperatingLeaseLiabilityNoncurrent http://fasb.org/us-gaap/2025#PropertyPlantAndEquipmentGross http://fasb.org/us-gaap/2025#PropertyPlantAndEquipmentGross 0001177702…
• ARCB (ARCBEST CORPORATION)
• FY2025 10-K: U-Pack ® . Our technology and innovation team provides custom-built solutions, leading-edge technology, and advanced analytics that help support our customers and optimize supply chains. ​ Our operations are conducted through our two reportable operating segments, which are described further in the Asset-Based Segment…
• FY2025 10-K: …Compensation and Liability Act of 1980 , as amended, or other federal or state environmental statutes, at several hazardous waste sites. After investigating our subsidiaries' involvement in waste disposal or waste generation at such sites, we have either agreed to de minimis settlements or determined that our…
• XPO (XPO, Inc.)
• FY2025 10-K: …on Schedule 14A filed with the SEC on April 21, 2020). 10.4 + Form of Performance-Based Restricted Stock Unit Award Agreement (2016 Omnibus Incentive Compensation Plan) (incorporated herein by reference to Exhibit 10.1 to the registrant's Quarterly Report on Form 10-Q filed with the SEC on May 10, 2022). 10.5 + Form…
• FY2025 10-K: 5-12-31 0001166003 us-gaap:StateAndLocalJurisdictionMember 2024-12-31 0001166003 us-gaap:DomesticCountryMember 2025-12-31 0001166003 us-gaap:DomesticCountryMember 2024-12-31 0001166003 us-gaap:ForeignCountryMember 2025-12-31 0001166003 us-gaap:ForeignCountryMember 2024-12-31 0001166003…
• KNX (Knight-Swift Transportation Holdings Inc.)
• FY2025 10-K: …us-gaap:FairValueInputsLevel2Member 2025-12-31 0001492691 knx:ClassAMember knx:U.S.XpressMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2025-12-31 0001492691 knx:ClassAMember knx:U.S.XpressMember us-gaap:FairValueMeasurementsRecurringMember 2025-01-01 2025-12-31 0001492691…
• FY2025 10-K: 91 knx:CargoDamageLiabilityMember 2025-12-31 0001492691 knx:CargoDamageLiabilityMember 2024-12-31 0001492691 knx:GroupMedicalLiabilityMember 2025-12-31 0001492691 knx:GroupMedicalLiabilityMember 2024-12-31 0001492691 knx:PolicyPeriodNovember12013ToOctober312024Member 2025-12-31 0001492691…

International Package (reported)

• FDX (FedEx Corporation)
• FY2025 10-K: …offerings as a result of strengthening e-commerce. U.S. ground home delivery/economy package volume increased 5% in 2025, also primarily due to strong growth in e-commerce. U.S. deferred package volume increased 4% in 2025 primarily due to mix shift toward our deferred service offerings. International and U.S.…
• FY2025 10-K: …for Federal Express. In addition, Federal Express works with FedEx Logistics to secure air charters and other cargo space for U.S. customers. Billings for such services are based on negotiated rates and are reflected as revenue of the billing segment. These rates are adjusted from time to time based on market…
• EXPD (EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.)
• FY2025 10-K: …transaction or service order constitutes a separate contract with the customer. However, when the Company provides multiple services to a customer, different contracts may be present for different services. The Company combines the contracts, which form a single performance obligation, and accounts for the contracts…
• FY2025 10-K: …amortization, selling and promotion and other as shown in the consolidated statements of earnings. Other than the United States, only the People's Republic of China, including Hong Kong, represented more than 10 % of the Company's total revenue, total operating income, total identifiable assets or equity in any…
• CHRW (C.H. ROBINSON WORLDWIDE, INC.)
• FY2025 10-K: …combine strategy with practical experience for customized action plans that succeed in the real world; and • Stability: Our customers and our contract carriers rely on us to support critical elements of their business. Our financial strength, discipline, and consistent track record of success are a key foundation of…
• FY2025 10-K: …2024-01-01 2024-12-31 0001043277 chrw:TransportationCustomersFreightMember us-gaap:TransferredOverTimeMember 2024-01-01 2024-12-31 0001043277 us-gaap:OperatingSegmentsMember chrw:SourcingMember chrw:NorthAmericanServiceTransportationNASTMember us-gaap:TransferredAtPointInTimeMember 2024-01-01 2024-12-31 0001043277…
• GXO (GXO Logistics, Inc.)
• FY2025 10-K: 6+ Form of Performance Share Unit Award Agreement (2021 Omnibus Incentive Compensation Plan) (incorporated by reference to Exhibit 10.5 of the Company's Quarterly Report on Form 10-Q (Commission file no. 001-40470) filed with the SEC on May 5, 2022). 77 10.17+ Form of Performance Share Unit Award Agreement (2021…
• FY2025 10-K: …2023-01-01 2023-12-31 0001852244 country:ES 2025-01-01 2025-12-31 0001852244 country:ES 2024-01-01 2024-12-31 0001852244 country:ES 2023-01-01 2023-12-31 0001852244 country:IT 2025-01-01 2025-12-31 0001852244 country:IT 2024-01-01 2024-12-31 0001852244 country:IT 2023-01-01 2023-12-31 0001852244…
• ZTO (ZTO Express (Cayman) Inc.)
• FY2025 20-F: …deliveries in China of parcels weighing under 50 kilograms with expected delivery time ranging from 24 to 72 hours. Our delivery time has improved over time. The following chart sets out the services provided by us and our network partners. ​ ​ ​ ​ ​ Key Category ​ ​ ​ ​ ​ ​ ​ Service Offerings Domestic Express ​…
• FY2025 20-F: …or may be revealed; (iv) we shall verify the identity of senders and register their identity information when receiving express parcels and shall not receive their express parcels where senders refuse to furnish identity information or furnish false identity information; (v) we shall refuse to accept prohibited…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.