UPS Stock Slides as Investors Look Past Q1 Earnings Beat to Margin Weakness

TLDR

• UPS beat Q1 EPS estimates with $1.07 adjusted vs. $1.02 expected
• Revenue came in at $21.2 billion, above the $20.99 billion forecast
• Operating margin fell to 6.2% from 8.2% a year ago
• UPS reaffirmed its full-year 2026 guidance of $89.7 billion in revenue
• Stock dropped roughly 3% in premarket despite the beat

UPS posted a stronger-than-expected first quarter on Tuesday, but the market wasn’t impressed. The stock slipped around 3% in premarket trading, sitting at $105.06, even as the company cleared Wall Street’s bar on both earnings and revenue.

Adjusted EPS came in at $1.07, topping the $1.02 consensus. Revenue hit $21.2 billion against an expected $20.99 billion. On the surface, a clean beat.

But dig a little deeper and you can see what’s bothering investors. A year ago, UPS earned $1.49 per share and pulled in $21.5 billion in revenue. This quarter’s numbers are better than feared, but they’re still well below where the company was twelve months back.

United Parcel Service, Inc., UPS

Operating profit margin landed at 6.2%, in line with estimates but down sharply from 8.2% in the same quarter last year. That’s the number Wall Street is watching.

Net income fell to $864 million, or $1.02 per share, compared with $1.19 billion, or $1.40 per share, in Q1 2025.

Strategic Transition Weighs on Near-Term Results

CEO Carol Tomé described the quarter as a “critical transition period.” The company is actively pulling back from low-margin Amazon delivery business, which is dragging on volume comparisons. There are a couple more quarters of that headwind ahead.

U.S. domestic revenue fell 2.3%, driven by an expected dip in volume tied to that Amazon wind-down. It’s a deliberate move, but it still hurts the top line in the near term.

UPS said it hit $600 million in cost savings during Q1 from its network efficiency program. The company expects to reach $3 billion in year-over-year savings for the full year 2026.

Automation upgrades and network restructuring are central to the turnaround plan. The results suggest progress, but investors want to see it in the margin line, not just in guidance language.

Full-Year Outlook Held Steady

UPS reaffirmed its 2026 financial targets. The company still expects $89.7 billion in full-year revenue and a non-GAAP adjusted operating margin of 9.6%.

Capital expenditures are projected at around $3 billion. Dividend payments are expected to total approximately $5.4 billion, with no change to the quarterly payout signaled.

Tomé said she expects the company to return to revenue and operating profit growth in Q2, along with margin expansion.

Wall Street is currently projecting full-year sales of about $89.6 billion and operating profit of $8.5 billion, broadly in line with company guidance.

Coming into Tuesday, UPS stock was up 9% year-to-date and 11% over the past twelve months. Even so, the stock is down roughly 47% over the past five years.

Back in 2021, UPS generated an operating margin of 13.5% on $97.3 billion in revenue. Last year, the margin was 9.8% on $88.7 billion. The gap tells the story of how far the company still has to go.

The stock currently trades at under 15 times forward earnings, compared to roughly 18 times five years ago.

Company executives held a conference call at 8:30 a.m. ET Tuesday to discuss the results.

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