UPS
UPS
Hold 2026-03-06
Model
DCF
Price at Report
$102.36
Base IV
$113.65
Bear IV
$71.66
Bull IV
$155.84
Entry Zone: 85-102 · Sell Above: 130
Bore Family Office
Valuation Report — United Parcel Service (UPS) • March 6, 2026
Unlevered DCF (FCFF @ WACC) • Discount Rate: 8.00% • Current Price: $102.36
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
United Parcel Service (UPS) is the world's largest package delivery company and a leading provider of global supply chain management solutions. Founded in 1907 in Seattle by 19-year-old James Casey with a $100 loan, UPS has grown from a local messenger service into a $90B-revenue global logistics network spanning 220 countries and territories. Headquartered in Atlanta, Georgia, UPS employs ~500,000 people and operates a fleet of 570+ aircraft and 125,000+ delivery vehicles.
The turnaround story: UPS has been in a restructuring since 2023, driven by three compounding headwinds: (1) loss of the Amazon contract (~11% of U.S. volume), which Amazon pulled in-house to its own delivery network; (2) Teamsters union contract signed in 2023 that added ~$500M annually in labor costs; and (3) the post-COVID parcel volume normalization after pandemic-era surge. Management responded with a "fit to serve" restructuring: 12,000 layoffs, closure of 200+ facilities, and divestiture of Coyote Logistics (truckload brokerage). FY2026 is framed as the recovery year with FCF guidance of ~$5.7B.
| Segment | % Revenue | What It Does | Op Margin | Notes |
|---|---|---|---|---|
| U.S. Domestic Package | ~65% | Ground + air parcel delivery in US | ~8% | Volume recovering post-Amazon; key margin driver |
| International Package | ~25% | Cross-border parcel delivery worldwide | ~17% | High-margin segment; growing faster than domestic |
| Supply Chain Solutions | ~10% | Freight, healthcare logistics, 3PL | ~6% | Post-Coyote divestiture; smaller, more focused |
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $97,287 | $100,338 | $90,958 | $91,070 | $88,661 |
| EBITDA ($M) | $15,763 | $16,282 | $12,507 | $12,077 | $11,613 |
| Operating Income ($M) | $12,810 | $13,094 | $9,141 | $8,468 | $7,867 |
| Net Income ($M) | $12,890 | $11,548 | $6,708 | $5,782 | $5,572 |
| EPS (diluted) | $14.68 | $13.20 | $7.80 | $6.75 | $6.56 |
| Free Cash Flow ($M) | $10,813 | $9,335 | $5,080 | $6,213 | $4,765 |
| Annual DPS | $4.080 | $6.080 | $6.480 | $6.520 | $6.560 |
| Total Debt ($M) | $25,528 | $23,521 | $26,729 | $25,652 | $28,590 |
| Rev YoY Growth | — | +3.1% | -9.3% | +0.1% | -2.6% |
⚙️ WACC Build (DCF)
| Input | Value | Notes |
|---|---|---|
| Risk-Free Rate (Rf) | 4.30% | 10-yr US Treasury yield |
| Beta (β) | 1.010 | Market beta (Finnhub) |
| Equity Risk Premium (ERP) | 5.5% | Damodaran US ERP |
| Cost of Equity (Ke) | 9.86% | Ke = Rf + β × ERP |
| Pre-Tax Cost of Debt | 3.56% | Interest exp / gross debt |
| After-Tax Cost of Debt (Kd) | 2.77% | × (1 − 22%) |
| Weight Equity (We) | 75.3% | Mkt cap $0.0B |
| Weight Debt (Wd) | 24.7% | Gross debt $0.0B |
| WACC | 8.00% | DCF discount rate |
📈 DCF Scenarios
$72
🔴 Bear
$114
📊 Base
$156
🚀 Bull
$102.36
Current Price
$111
Analyst Avg PT
📋 Full 10-Year Projection Tables
Bear Scenario
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $5.10B | $4.72B | $4.72B |
| Year 2 | Stage 1 | $5.20B | $4.46B | $9.18B |
| Year 3 | Stage 1 | $5.31B | $4.21B | $13.39B |
| Year 4 | Stage 1 | $5.41B | $3.98B | $17.37B |
| Year 5 | Stage 1 | $5.52B | $3.76B | $21.13B |
| Year 6 | Stage 2 | $5.60B | $3.53B | $24.66B |
| Year 7 | Stage 2 | $5.69B | $3.32B | $27.98B |
| Year 8 | Stage 2 | $5.77B | $3.12B | $31.10B |
| Year 9 | Stage 2 | $5.86B | $2.93B | $34.03B |
| Year 10 | Stage 2 | $5.95B | $2.75B | $36.78B |
| Terminal | — | TV=$101.1B | PV(TV)=$46.8B (56% of EV) | EV=$83.6B |
Base Scenario
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $5.35B | $4.95B | $4.95B |
| Year 2 | Stage 1 | $5.72B | $4.91B | $9.86B |
| Year 3 | Stage 1 | $6.13B | $4.86B | $14.72B |
| Year 4 | Stage 1 | $6.55B | $4.82B | $19.54B |
| Year 5 | Stage 1 | $7.01B | $4.77B | $24.31B |
| Year 6 | Stage 2 | $7.29B | $4.60B | $28.91B |
| Year 7 | Stage 2 | $7.58B | $4.43B | $33.34B |
| Year 8 | Stage 2 | $7.89B | $4.26B | $37.60B |
| Year 9 | Stage 2 | $8.20B | $4.10B | $41.70B |
| Year 10 | Stage 2 | $8.53B | $3.95B | $45.65B |
| Terminal | — | TV=$159.0B | PV(TV)=$73.7B (62% of EV) | EV=$119.3B |
Bull Scenario
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $5.50B | $5.09B | $5.09B |
| Year 2 | Stage 1 | $6.05B | $5.19B | $10.28B |
| Year 3 | Stage 1 | $6.66B | $5.28B | $15.56B |
| Year 4 | Stage 1 | $7.32B | $5.38B | $20.94B |
| Year 5 | Stage 1 | $8.05B | $5.48B | $26.42B |
| Year 6 | Stage 2 | $8.54B | $5.38B | $31.80B |
| Year 7 | Stage 2 | $9.05B | $5.28B | $37.08B |
| Year 8 | Stage 2 | $9.59B | $5.18B | $42.26B |
| Year 9 | Stage 2 | $10.17B | $5.09B | $47.35B |
| Year 10 | Stage 2 | $10.78B | $4.99B | $52.34B |
| Terminal | — | TV=$222.0B | PV(TV)=$102.8B (66% of EV) | EV=$155.2B |
🔲 Sensitivity Table
| WACC \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 6.0% | $159 | $176 | $197 | $225 | $265 |
| 6.5% | $140 | $152 | $168 | $189 | $216 |
| 7.0% | $124 | $134 | $146 | $161 | $181 |
| 7.5% | $111 | $119 | $128 | $140 | $154 |
| 8.0% | $100 | $106 | $114 | $123 | $134 |
| 8.5% | $90 | $95 | $102 | $109 | $118 |
| 9.0% | $82 | $86 | $91 | $97 | $104 |
| 9.5% | $75 | $78 | $83 | $87 | $93 |
| 10.0% | $68 | $71 | $75 | $79 | $84 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | Ticker | P/E | EV/EBITDA | FCF Yield | Div Yield | Op Margin |
|---|---|---|---|---|---|---|
| UPS | UPS | 15.6x | 11.4x | 4.7% | 6.4% | 8.9% |
| FedEx | FDX | 13.2x | 8.9x | 5.9% | 2.2% | 7.3% |
| DHL (private) | — | — | 9.5x | — | — | 9.1% |
| XPO Logistics | XPO | 22.4x | 10.2x | 3.1% | — | 9.8% |
| Old Dominion | ODFL | 26.8x | 15.2x | 3.8% | 0.9% | 22.4% |
| UPS 5-yr Hist. | — | 20.1x | 13.0x | 5.2% | 3.5% | 12.0% |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $6.560 |
| Current Yield | 6.41% |
| Consecutive Growth Years | 0 |
| 1-yr DPS CAGR | +0.6% |
| 3-yr DPS CAGR | +2.5% |
| 5-yr DPS CAGR | +10.0% |
| 10-yr DPS CAGR | — |
| Payout Ratio (DPS/EPS) | 100.0% ⚠️ |
| FCF Payout Ratio | 117.0% ⚠️ |
| Sustainability Verdict | ⚠️ Watch |
⚠️ Dividend sustainability warning: UPS pays $6.56/share annually ($5.6B total), but FY2025 FCF was only $4.76B — FCF payout ratio exceeded 100%. On an EPS basis, the payout is exactly 100% (EPS = DPS = $6.56). This is not sustainable. Management must either (a) recover FCF to $6B+ to cover the dividend, or (b) cut/freeze the dividend. Given the FY2026 management FCF guidance of $5.7B, near-term coverage improves but remains thin. A dividend cut to $5.00-5.50 would be prudent and would free ~$1B annually for debt reduction and capex. Rating: Watch — do not rely on dividend stability; FCF recovery over next 12-18 months is the critical variable.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $14.68 | — | — | — | Actual |
| 2022 | $13.20 | — | — | — | Actual |
| 2023 | $7.80 | — | — | — | Actual |
| 2024 | $6.75 | — | — | — | Actual |
| 2025 | $6.56 | — | — | — | Actual |
| 2026 | $6.57 | $7.14 | $7.59 | 31 | Estimate |
| 2027 | $6.80 | $8.10 | $8.92 | 31 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $97.3B | — | — | — | Actual |
| 2022 | $100.3B | — | — | — | Actual |
| 2023 | $91.0B | — | — | — | Actual |
| 2024 | $91.1B | — | — | — | Actual |
| 2025 | $88.7B | — | — | — | Actual |
| 2026 | $85.9B | $90.2B | $94.5B | 31 | Estimate |
| 2027 | $89.6B | $94.1B | $100.3B | 31 | Estimate |
(c) Individual Analyst Price Targets
Consensus: Avg $110.95 | Range $75–$130
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Stephanie Moore | Jefferies | Strong Buy | $130 | +27.0% |
| Thomas Wadewitz | UBS | Strong Buy | $125 | +22.1% |
| Ariel Rosa | Citigroup | Strong Buy | $120 | +17.2% |
| Scott Schneeberger | Oppenheimer | Buy | $115 | +12.3% |
| Jack Atkins | Stephens & Co. | Buy | $112 | +9.4% |
| Brian Ossenbeck | JP Morgan | Hold | $107 | +4.5% |
| Tom Black | Barclays | Hold | $105 | +2.6% |
| David Vernon | Bernstein | Hold | $102 | -0.4% |
| Bruce Chan | Stifel | Hold | $100 | -2.3% |
| Ken Hoexter | BoA | Sell | $90 | -12.1% |
| Jordan Alliger | Goldman Sachs | Sell | $85 | -17.0% |
| Helane Becker | TD Cowen | Sell | $75 | -26.7% |
(d) Earnings Surprise History
| Quarter | EPS Act vs Est | EPS Beat/Miss | Rev Act vs Est | Rev Beat/Miss | Guidance |
|---|---|---|---|---|---|
| Q4 2025 | $2.38 vs $2.22 | +$0.16 ✅ | $22.1B vs $21.8B | +$0.3B ✅ | FY2026 guidance $89-91.5B rev, adj EPS $7.07-7.69 |
| Q3 2025 | $1.74 vs $1.31 | +$0.43 ✅ | $22.1B vs $21.6B | +$0.5B ✅ | Raised full-year guidance; restructuring on track |
| Q2 2025 | $1.55 vs $1.58 | $-0.03 ❌ | $21.8B vs $22.0B | $-0.2B ❌ | Maintained full-year guidance |
| Q1 2025 | $1.49 vs $1.39 | +$0.10 ✅ | $21.3B vs $21.2B | +$0.1B ✅ | Reaffirmed restructuring targets; announced 12,000 layoffs |
(e) Confidence Band Commentary
UPS beat EPS in 3 of 4 quarters in FY2025, with the Q3 beat (+32.7%) particularly impressive, suggesting restructuring is delivering faster than expected. The analyst range is extremely wide ($75-$130 PT) — the widest spread of the three tickers in this report — reflecting deep disagreement about whether UPS can sustainably recover margins or whether structural Amazon/volume headwinds are permanent. The bear case (Helane Becker, TD Cowen, $75 PT) centers on dividend cut risk + permanent volume share loss. The bull case (Jefferies, $130) believes restructuring delivers 300bps of margin expansion and volume recovers by H2 2026. This is a high-variance, asymmetric situation — worth owning only if comfortable with near-term dividend risk.
💡 Investment Thesis
🚀 Bull Case — What Has to Be True
- Restructuring delivers 250-350bps of margin expansion by 2027 (operating margin recovers to 12-13%)
- U.S. domestic volume inflects positive by mid-2026 as SMB and healthcare volumes replace Amazon loss
- FCF recovers to $6.5-7B by 2027, covering the dividend and enabling modest buybacks
- International segment continues growing at 5-7%/yr, contributing high-margin volume growth
- Stock re-rates to 16-18x EPS as turnaround credibility builds; 2027 EPS of $8.10 → $130-145 fair value
🔴 Bear Case — Real Risks
- Dividend cut risk: FCF payout exceeded 100% in FY2025; if FY2026 FCF disappoints, a cut becomes necessary
- Amazon's logistics buildout permanently impairs UPS's U.S. domestic volume trajectory
- Labor costs remain sticky — Teamsters contract extends through 2028; wage inflation limits margin recovery
- Macro slowdown (tariff-driven recession) reduces parcel volume across all B2C e-commerce segments
- Capital-intensive network creates high fixed costs; volume shortfalls hit margins disproportionately
📊 Base Case — The Analyst View
UPS is in the middle of a genuine operational turnaround with a high-yield dividend that is at-risk in the near term. At $102.36, the stock trades at 14.3x FY2026E earnings and offers a 6.4% yield — both attractive on the surface, but the yield is not safe at current FCF levels. The Base case: restructuring delivers $5.5-6B FCF by FY2027, operating margins recover to 11%, and the stock recovers toward $110-120 as turnaround execution credibility builds. The key question for any buyer is: can you handle a potential dividend cut to $5.00? If yes, UPS at $100-105 is a compelling turnaround candidate. If not, wait for FCF coverage clarity.
⚖️ DCF Verdict: Hold — United Parcel Service (UPS)
Current price: $102.36 | Analyst Avg PT: $110.95
$72
🔴 Bear
$114
📊 Base
$156
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$102 | Begin position |
| Tier 2 — Add | ≤$93 | Add on weakness |
| Tier 3 — Full | ≤$85 | Full allocation |
| Sell Alert | ≥$130 | Above fair value — consider trimming |
UPS is a high-quality franchise at a deeply discounted valuation — but the discount exists for real reasons. At $102.36, Base IV of $114 implies 11% upside, and the 6.4% yield is extraordinary for a blue-chip industrial. However, the dividend is at serious risk — FCF payout exceeded 100% in FY2025, and only a swift FCF recovery to $5.7B+ in FY2026 averts a cut. Verdict: Hold / Cautious Accumulate. For investors who can tolerate dividend cut risk, starting a small position at $95-100 makes sense — the turnaround is real and restructuring beats are surprising to the upside. Full position at $85-90 where Bear IV is approached and margin of safety is compelling. Becomes a Buy if FCF coverage > 1.0x confirmed in Q1 2026 results. This is not currently in the portfolio. Not recommended at current price without dividend cut risk acceptance.
Bore Family Office • Analysis generated by Lurch • Not investment advice.