UPS Stock Is Down 57% From Its Record. Is It a Buy Before Its Oct. 27 Report?
2026-10-24 23:18
•Daniel Sparks •The Motley Fool
•••• •• Axe Cap view
Is UPS a Bargain or a Value Trap Ahead of Earnings?
UPS shares have plunged, yielding an attractive dividend, but execution risks abound as it trims Amazon volumes.
UPS’s stock has dropped by over half since its 2022 peak, mainly due to Amazon slashing its parcel volume with the carrier. This cut has forced UPS to streamline its network, and early signs show better operating margins, which is encouraging. The stock now trades on roughly 13 times forward earnings, cheaper than broader U.S. peers, and the dividend yield near 6.5% turns heads in a low-yield world. But don’t mistake cheap for safe. UPS’s free cash flow is tight, just enough to cover dividends, leaving little wiggle room if volumes don’t rebound or costs creep higher. The upcoming Q3 report on October 27 will be a pivotal moment to see if the management’s operational fixes truly stick or if risks of margin erosion persist. For South Africans, the USD/ZAR rate will matter too — a weaker rand could make U.S. dividends more valuable locally, but also adds currency risk. this is just our opinion and not financial advice
Watch UPS closely for the Q3 numbers before diving in; consider a small, speculative position if the earnings beat expectations and margin improvement holds. Avoid loading up until there's clearer evidence the turnaround plan is working.
- UPS
- USD/ZAR
- Margin pressure persists despite cost cuts
- Free cash flow may not sustain current dividend
- Rand volatility impacting local returns
6/10
UPS stock has fallen 57% from its 2022 peak to around $100, pushing its dividend yield to 6.5%. While earnings have declined 44% from 2022 to expected 2026 levels, the company's leaner network strategy following its Amazon volume cut is showing promise with improved margins. The stock trades at a discount to the S&P 500, and management expects $5.5 billion in free cash flow for 2026 to cover dividends, though with limited cushion. The upcoming Q3 earnings report on Oct. 27 will be a key test of whether the company can meet its second-half forecasts.
Our take is based on reporting first published by The Motley Fool.