UPS Announces Delivery Cuts for Amazon, Prioritizes Profitability

Context:

UPS (UPS) has declared plans to reduce deliveries for Amazon (AMZN), leading to a 15% stock decline on Thursday. The move is part of the company's long-term profitability strategy.

Details of the Announcement:

UPS will decrease Amazon delivery volume by over 50% by the second half of 2026. This adjustment is expected to lower volumes in the near term but enhance margins.

UPS CFO Brian Dykes emphasized that the shift is part of a broader strategy to allocate resources to areas with higher returns. Amazon remains a long-term partner but will focus on deliveries involving multiple pickup locations or cross-country shipments.

Financial Outlook:

UPS projects revenue of approximately $89 billion in 2025, below analysts' consensus of $94.9 billion. The quarterly release has mixed implications, with Evercore ISI analyst Jonathan Chappell expressing surprise at the pace of Amazon delivery reductions.

Market Reaction:

Despite fourth-quarter earnings beating expectations, investors remain concerned about the weak sales outlook and Amazon volume reduction.

Conclusion:

UPS's decision to cut Amazon deliveries has sent its stock tumbling, reflecting the shift in focus towards long-term profitability. The market outlook remains cautious as investors await further developments in the company's strategy.