UPS Cuts Amazon Deliveries, Aims for Profitability
UPS (UPS) announced it will significantly reduce deliveries for its largest customer, Amazon (AMZN), leading to a stock decline of approximately 15%. However, UPS emphasized that this strategic shift aims to enhance long-term profitability.
CFO Brian Dykes explained that UPS is optimizing its operations to maximize yields and returns. By reducing Amazon deliveries by more than 50% by mid-2026, UPS anticipates higher margins despite lower volumes. Dykes clarified that UPS will maintain its partnership with Amazon but will focus on deliveries involving multiple pickup locations or national shipments.
While UPS projected revenue of $89 billion in 2025, falling short of analysts' consensus forecasts, it outperformed on fourth-quarter earnings. Earnings per share of $2.75 exceeded expectations, and the US domestic operating margin reached 10.1%, surpassing estimates of around 9.5%.
However, investors remain cautious due to the reduced Amazon volumes. Jefferies analyst Stephanie Moore noted that weak sales outlook and lower volumes have been challenging for investors.