UPS Stock Plunges After Plans for 50% Amazon Volume Cut
UPS stock is lower after announcing that it plans to cut volume for Amazon, its largest customer, by more than 50% by late 2026. Here's what you need to know.
UPS (UPS) stock is plunging Thursday after the international shipping company beat profit expectations for its fourth quarter but provided a weak outlook on 2025 and announced that it plans to cut volume for its largest customer by more than 50%.
Investors have long wondered about the potential impact on UPS' business as Amazon.com (AMZN) assumed responsibility for an increasing share of its own delivery volume.
That future is now, and UPS appears to be taking proactive steps to optimize its own operations. A period of transition is reflected in 2025 guidance and the price of UPS stock too.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Management forecast revenue of approximately $89 billion and an operating profit of $9.6 billion this year, well below analysts' expectations of $95 billion and $10.1 billion.
UPS said it will lower shipping volumes for Amazon, its largest customer, by more than 50% by the second half of 2026. Amazon accounted for 11.8% of total revenue at UPS in 2023.
"We are making business and operational changes that, along with the foundational changes we've already made, will put us further down the path to becoming a more profitable, agile and differentiated UPS that is growing in the best parts of the market," CEO Carol Tomé said in a statement.
Indeed, UPS expects to realize annual savings of approximately $1 billion through efficiency initiatives related to its transition.
In the three months ending December 31, UPS reported a 1.5% year over year increase in revenue to $25.3 billion. Earnings per share (EPS) rose 11.3% from the year-ago period to $2.75.
Results were mixed compared with analysts' expectations. Wall Street was anticipating revenue of $25.4 billion and earnings of $2.53 per share, according to Yahoo Finance.
Is UPS stock a buy, sell or hold?
Despite the sharp sell-off, Wall Street remains bullish on the shipping giant. UPS stock was down 16% in 2024 vs a gain of 25% for the S&P 500, which suggests the market understood the business risk management is addressing with its recent guidance.
According to S&P Global Market Intelligence, the average analyst target price for UPS stock is $148.91, representing implied upside of more than 35% from Thursday's intraday lows.
Analysts will likely revise their ratings and price targets following the Amazon news. But, right now, the consensus recommendation is a Buy.
Financial services firm BofA Securities is one of those outfits with a Buy rating on UPS stock. And analyst Ken Hoexter anticipated the Amazon news.
"We are raising our rating on UPS' shares to Buy from Neutral as we see a potential end to the freight recession in 2025, as well as benefits from the company's dynamic pricing model and cost initiatives," Hoexter said in a January 16 note.
"We believe these gains will work to offset potential volume losses as it insources the remainder of its SurePost last mile volumes from the US Postal Service, continued Amazon revenue glide down, and its high-cost Teamster labor contract."
Hoexter has a 12-month price target of $150 for UPS stock.
Editor's note: This article originally stated that Amazon would be cutting volume by 50%, but the decision was made by UPS. "Due to their operational needs, UPS requested a reduction in volume and we certainly respect their decision. We'll continue to partner with them and many other carriers to serve our customers," said Kelly Nantel, a spokesperson for Amazon, in an emailed statement. We apologize for the error.
Related Content
-
Flashback Finance: The Cost of Retiring the Year You Were BornJust like groceries, gas and home prices, the cost of retiring is subject to inflation. Here is a look at what it cost to retire in the year you were born.
-
How One Hospital Visit Overseas Could Wreck Your FinancesProper planning can give you peace of mind and protection, regardless of what happens on your trips.
-
It's Time to Rethink What 'Aging Well' MeansDon’t fall into the trap of thinking there is a "right way" to age. Here's how to reframe aging in a healthy, achievable way.
-
Your Guide to Financial Stability as a Military Spouse, Courtesy of a Financial PlannerThese practical resources and benefits can help military spouses with managing a budget, tax and retirement planning, as well as supporting their own career
-
3 Steps to Keep Your Digital Data Safe, Courtesy of a Financial PlannerAs data breaches and cyberattacks increase, it's vital to maintain good data hygiene and reduce your personal information footprint. Find out how.
-
Here's Why You Can Afford to Ignore College Sticker PricesCollege tuition fees can seem prohibitive, but don't let advertised prices stop you from applying. Instead, focus on net costs after grants and scholarships.
-
S&P 500 Tops 7,000, Fed Pauses Rate Cuts: Stock Market TodayInvestors, traders and speculators will probably have to wait until after Jerome Powell steps down for the next Fed rate cut.
-
Today's Senior Living Communities Are Not Your Grandma's 'Old Folks' Home': An Expert Guide to Shopping for the Right FitSenior living facilities have improved and are as diverse as the people who inhabit them. Now, they're more than just a place to go — they're a place to grow.
-
3 Common Misconceptions About Working With a Financial PlannerThink financial planners are only for the wealthy and that AI can replace human advice? Nope. Even people with moderate wealth need professional advice.
-
Should You Consider Investing in the Quantum Computing Sector? This Investment Adviser Has Some SuggestionsInvestors interested in quantum computing could consider ETFs focused on cloud services enabling small businesses to use big technology.
-
S&P 500 Hits New High Before Big Tech Earnings, Fed: Stock Market TodayThe tech-heavy Nasdaq also shone in Tuesday's session, while UnitedHealth dragged on the blue-chip Dow Jones Industrial Average.
