Can You Retire On UPS?

United Parcel Service has long been one of the world’s most trusted shipping giants, a backbone of global commerce that seems almost untouchable. But in the past half decade, shareholders have felt more turbulence than smooth sailing. The stock is down 46%.

That’s a sobering reality for a company many once viewed as a safe, compounding machine. The truth is, UPS has been wrestling with forces, both internal and external, that have reshaped its profit engine and called into question the pace of its future growth.

Now trading at only 12.8 times earnings, with a juicy forward dividend yield of 7.57% it looks on paper like an income investor’s dream. But the story is more complicated, and the path back to sustained growth may be longer than many expect.

Key Points

• Volumes and margins fell sharply after the e-commerce boom at the turn of the decade

• Cutting low-margin business and shrinking operations to lift long-term margins.

• Tariffs, labor costs, and tech spending keep growth muted near term.

How the Ecommerce Boom Fizzled Out

UPS’ business popped when lockdowns supercharged e-commerce. Daily package volumes jumped to 25 million by 2021. Average revenue per piece also climbed by around 17%, giving a healthy lift to operating margins and earnings per share.

But the tailwind turned into a headwind by 2022. Package volumes started slipping as consumers returned to stores, inflation tightened household budgets.

UPS raised prices to protect margins, but rising labor and fuel costs ate away at those gains. Two years ago, operating margins had fallen and EPS dropped by almost 50%.

Recovery Meets Cost Reality

Last year, the picture was mixed. Volumes ticked up slightly to 22 million packages a day but those wins came with heavier baggage, a costly new labor contract, and higher pension obligations.

Add to that regulatory fines in the U.S. and Italy, plus impairment charges and ongoing digital infrastructure investments, and operating margins compressed further to under 10%. Earnings slid again to under $7 per share.

Sacrificing Now for Later

The first half of this year suggests UPS is deliberately trading short-term revenue for healthier long-term margins.

UPS is slashing its dependence on Amazon, its largest (but lower-margin) customer, aiming to cut Amazon volume in half by mid-2026.

Price hikes are designed not just to chase inflation but to weed out lower-value shipments, like its budget “Ground Saver” service.

UPS has shuttered dozens of distribution centers and reduced headcount to align costs with the new reality of its business mix.

These moves nudged adjusted operating margins up 50 basis points to 7% in early 2025, but revenue still slipped 2% and EPS dipped 1%.

Risks Going Unnoticed

One risk is the potential hit from trade policy shifts. Tariff changes, especially the Trump administration’s unpredictable stance on cross-border e-commerce from China, could disrupt package flows and dent international revenue streams.

Another overlooked factor is the capital intensity of UPS’ tech transformation. The “digital ecosystem” push is critical for operational efficiency, but the payoff will take years, and the spending weighs on near-term earnings.

What’s Next?

Analysts expect another year of contraction in 2025, revenue down about 4% and earnings off 7%. Modest growth could return in 2026 and 2027, but those forecasts assume the strategic reset works as planned and macro conditions stay cooperative.

For income-focused investors, the stock’s high yield and low valuation may offer a floor. But for those seeking a compounding growth story, UPS looks more like a patient recovery project than a fast-moving vehicle to wealth.