TenQ

The UPS story

UPS delivers parcels worldwide, and its central question is whether higher revenue per package and a smaller network can sustain profit growth after its deliberate reduction in Amazon volume.

Written from UPS's own filings with the SEC, and rewritten when it publishes a new earnings release. Updated 2026-09-30.

  • $94.25share price, last close
  • $80.2Bmarket value
  • 17/36TenQ Score checks passed
  • 3.3%growth a year the price assumes

The story in brief

  • Amazon reset completed. UPS reported completing its Amazon volume reduction and related network reconfiguration in June 2026, shifting attention to growth from the reshaped business.
  • Margins need context. In the quarter to June 2026, UPS reported a non-GAAP adjusted operating margin of 9.2%, but its GAAP operating margin was 4.1% after transformation charges.
  • Limited dividend cushion. Expected dividend payments of around $5.4 billion for 2026, subject to board approval, sit close to free cash flow of $5.5 billion over the last twelve months.

What drives the business

  • Amazon accounted for approximately 10.6% of UPS revenue in 2025, and UPS planned to reduce that customer's volume by more than 50% from 2024 levels by June 2026, a transition management reported completing.
  • UPS is shifting toward healthcare, business customers and smaller businesses, with its global healthcare portfolio generating more than $11 billion in revenue in 2025 and the Frigo-Trans and Andlauer Healthcare Group acquisitions expanding its cold chain capabilities.
  • A December 2025 agreement with the United States Postal Service covers final delivery for a portion of Ground Saver and Mail Innovations volume starting in 2026, supporting UPS's effort to lower delivery costs.
  • U.S. Domestic Package generated 65% of consolidated revenue in the quarter to June 2026, with revenue growing 6.0% as revenue per piece rose 9.3% and non-GAAP adjusted operating margin reached 8.0%.
  • International revenue grew 12.5% in the quarter to June 2026, supported by an 18.9% increase in revenue per piece, while Supply Chain Solutions revenue grew 7.8% through forwarding and logistics, including healthcare.

What the price assumes

At $94.25, the reverse DCF implies that free cash flow after stock-based pay grows 3.3% a year for ten years, using a discount rate of 10.2%.

UPS delivered 2.7% annual growth in that measure over the last 10 years, so the implied pace is above its historical record.

The implied pace matches the TenQ check's 3.3% bar at the stated precision, with that bar moving the historical growth rate halfway toward 4%.

Value UPS on your own assumptions

What could change the story

  • The quarter to June 2026 included $891 million in after-tax transformation charges, mainly workforce separation costs associated with the Driver Choice Program, showing the substantial cost of reshaping the network.
  • International revenue growth did not translate into stronger margins in the quarter to June 2026, as non-GAAP adjusted operating margin fell to 12.4% from 15.2% in the comparable period.
  • The domestic recovery follows a weak longer record, with revenue growth of -0.4% over the last twelve months and annual revenue growth of -4.0% over the last three years, contributing to only 1 of 6 Growth checks passing.
  • Total debt of $24.5 billion compares with cash and short-term investments of $4.7 billion, while UPS passed only 2 of 6 Financial health checks, failing the liquidity and debt trend checks.
  • The narrow gap between expected 2026 dividends and trailing free cash flow leaves limited room for weaker cash generation without drawing on other financial resources.

What to watch next

  • UPS raised its full-year 2026 outlook to approximately $91.2 billion in revenue, approximately $8.65 billion in non-GAAP adjusted operating profit and approximately $7.22 in non-GAAP adjusted diluted earnings per share.
  • The next releases can show whether domestic revenue per piece continues to outgrow non-GAAP adjusted cost per piece, which increased 8.0% in the quarter to June 2026.
  • UPS expects approximately $3 billion in full-year 2026 benefits from its network and efficiency initiatives after achieving approximately $1.2 billion in the first six months of 2026, making realized benefits and further transformation costs important measures of progress.
  • Cash generation alongside expected 2026 capital expenditures of about $3.0 billion and dividend payments of around $5.4 billion, subject to board approval, will show how much financial room the operating recovery creates.

Sources

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