The most recent Q4 2025 results saw the company post an increase in both revenue and earnings. However, revenue of $24.5 billion witnessed an overall decline of 3.25% year-on-year. The US domestic segment, which is its biggest revenue generator, saw its revenue fall 3.2% in the same period due to a decline in volume.

Also, earnings fell 13.5% year over year to $2.38 per share, beating the consensus estimate of $2.20 per share.

Cash flow from operating activities in 2025 also decreased to $8.45 billion from $10.1 billion in 2024. Accordingly, free cash flow for the year also decreased to $5.5 billion from $6.3 billion in the same period. Overall, since the latest 10-Q has not been filed, the available cash balance for the quarter ended September 30, 2024 was $6.8 billion. This was well above its short-term debt levels of $1.7 billion.

In addition, the stock, after a moderate return over the past year, is trading at undervalued levels when compared to the sector average. Its forward P/E, P/S, and P/CF of 15.17, 1.02, and 9.61 are below the industry averages of 22.03, 1.95, and 16.95, respectively.

UPS’s growth may not be to many’s taste, but its scale of operations makes it hard to ignore. The company serves more than 200 countries and territories, with one of the most extensive logistics networks in the world. On average, UPS handles about 22.4 million packages every day worldwide, which is approximately 5.7 billion packages in the course of a year. This kind of daily volume speaks to the sheer size and capability of their delivery system.

The latest quarterly results gave a clear view of how this scaling translates into price strength. The average cost per piece for US domestic packages rose to $12.92, up 12.3% from $11.50 a year earlier and above the nine-month average of $12.43. Customers are willing to pay more, which points to strong loyalty. At the same time, UPS has maintained tight control over costs through a series of operational improvements. Purchased transportation as a share of total operating expenses fell from 16% to 12%, showing that the company has become less dependent on outside carriers, even as prices rose. Another helpful move has been to embed shipping tools directly into major e-commerce platforms like Shopify ( SHOP ). This integration makes it more difficult for smaller merchants to switch suppliers.

The decision to reduce reliance on one major customer, Amazon, may cause some short-term bumps, but is part of a deliberate effort to spread the revenue base and shift to higher-margin lines of business. B2B and healthcare shipments are coming into focus now, which should help profitability over time. On the labor front, UPS cut 48,000 operational roles by 2025, replacing much of that capacity with automated volume centers. These facilities use AI and robotics to sort packages more quickly and accurately. Finally, the company also finished retiring its MD-11 fleet this quarter, transitioning to a younger, more fuel-efficient airline network that should lower long-term operating costs.

Taken together, these actions reflect a clear plan to reshape the network for better efficiency and higher returns, even though the pace of revenue growth has been modest of late.

With all of this in mind, analysts have rated UPS stock a “moderate buy,” with an average price target of $106.65, indicating a potential upside of about 3% from current levels. Of the 28 analysts covering the stock, 11 have a “Strong Buy” rating, one has a “Moderate Buy” rating, 13 have a “Hold” rating, one has a “Moderate Sell” rating and two have a “Strong Sell” rating.

As of the date of publication, Pathikrit Bose had no positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com