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United Parcel Service (UPS) Faces Challenges Amidst Growth Potential
United Parcel Service (NYSE: UPS) is currently valued under $85 per share as the company navigates a downturn, reporting a 7% decrease in average daily volume in the U.S. and operating margins of only 7%. This marks a significant decline from its pandemic peak, where revenue reached $97.3 billion in 2021. Despite these struggles, UPS maintains growth prospects in its healthcare logistics and small to medium-sized business (SMB) segments, with SMB accounting for 32% of U.S. volumes, reflecting an upward trend.
The company has been impacted by increased labor costs due to a five-year Teamsters contract affecting approximately 330,000 workers, along with market competition from rivals like Amazon. UPS plans to cut its business volume with Amazon by 50% by June 2026, focusing instead on higher-margin packages. Currently, UPS trades at around 12 times forward earnings, present a more attractive option for long-term investors seeking income through its high dividend yield of 7.85%.
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