The United States and China recently announced a deal to temporarily reduce their high reciprocal tariffs. The 90-day agreement between the two nations to reduce tariffs has rekindled hopes of easing global trade tensions. The development is a highly welcome one for United Parcel Service UPS, which has a global presence.

Although signs of trade tensions easing have emerged, until a concrete long-term trade deal is inked, we are not out of the woods as far as this uncertainty is concerned. This can be gauged from the fact that while releasing its first-quarter 2025 results, last month, UPS refrained from providing any updates to the previously issued consolidated outlook for full year 2025 until there is more certainty in the macro environment.

Highlights of UPS’ Q1 Earnings & 2Q25 Guidance

UPS’ earnings (excluding 9 cents per share) of $1.49 per share beat the Zacks Consensus Estimate of $1.44 and improved 4.2% year over year. Revenues of $21.5 billion surpassed the Zacks Consensus Estimate of $21.1 billion but decreased 0.7% year over year.

U.S. Domestic Package revenues improved marginally to $14.46 billion despite a decline in volume. Revenues in the International Package division increased 2.7% year over year to $4.37 billion, owing to a 7.1% increase in average daily volume. Supply Chain Solutions revenues of $2.71 billion plunged 14.8% year over year due to the divestiture of Coyote Logistics, its freight-brokerage business.

UPS expects the second-quarter adjusted operating margin to be around 9.3%. Second-quarter revenues are expected to be around $21 billion. The effective tax rate is expected to be in the 23-23.5% range. The average daily volume for the U.S. Domestic segment is expected to decline 9% in the June quarter. Revenues in the International Package segment are expected to decline roughly 2% year over year in the June quarter.

The earnings beat in the first quarter of 2025 helped the company maintain its impressive earnings surprise record. UPS has outpaced the Zacks Consensus Estimate for earnings in three of the past four quarters (missing the mark once). The average beat is 2.4%.

United Parcel Service Price and EPS SurpriseUnited Parcel Service, Inc. Price and EPS Surprise

United Parcel Service,price-eps-surprise | United Parcel Service Quote

Headwinds Facing UPS Stock

UPS has been suffering from revenue weakness as geopolitical uncertainty and higher inflation continue to hurt consumer sentiment and growth expectations. The weak demand scenario has led to a decline in the volume of packages shipped.

The slowdown in online sales in the United States, apart from soft global manufacturing activity, adds to the woes. Labor costs, courtesy of the deal with the Teamsters union, are high, limiting bottom-line growth. Amid revenue weakness, rising capital expenses as witnessed in UPS’ case are unwelcome and may dent profit margins. United Parcel Service’s high debt levels represent a further cause for concern.

Story Continues

UPS’ Disappointing Price Performance

Due to the headwinds, UPS shares have performed disappointingly year to date, underperforming the Zacks Transportation—Air Freight and Cargo industry, rival FedEx FDX, and fellow industry player GXO Logistics GXO, in a year, mainly due to low shipment volumes.

YTD Price PerformanceZacks Investment Research

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UPS shares have performed even worse in a year, declining 32.6%, steeper than the industry’s 25.5% fall in the same timeframe. GXO Logistics and FedEx have plunged 10.9% and 22.9%, respectively, in the same time frame.

What Do Earnings Estimates Say for UPS Stock?

In the past 60 days, the Zacks Consensus Estimate for UPS’ second-quarter and third-quarter 2025 earnings and full-year 2025 and 2026 earnings have moved south.Zacks Investment Research

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UPS Stock Inexpensive Compared to Industry

In terms of the forward 12-month Price/Sales ratio, UPS is trading at 0.97X, lower than the industry’s 0.98X. The company has a Value Score of B. While FedEx has a Value Score of A, GXO Logistics has a Value Score of B.Zacks Investment Research

Image Source: Zacks Investment Research

Best to Avoid UPS Stock Now

Despite signs of easing trade tensions, we don’t expect the trade-related uncertainty to go away until a concrete long-term trade deal is in place. As a result, due to the tariff-related uncertainty, UPS is likely to continue suffering from a demand slowdown at least in the short term. UPS’ decision not to provide any updates to its previously issued consolidated 2025 outlook supports our view. The decline in the volume of packages shipped due to demand softness, high labor costs, and escalated debts represents major concerns.

Given the current scenario, we can safely say that despite the positive trade-related updates recently, it is not at all advisable to buy the stock now. Until there is more clarity, investors should avoid UPS stock and wait for a more stable setup.

UPS currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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United Parcel Service, Inc. (UPS):Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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