UPS

UPS is a deliberate-shrinkage story, and the numbers show the cost of that reset. Revenue has fallen from $100B (FY2022) to $88.7B (FY2025), and net income has more than halved over four years — $12.9B (2021) → $11.5B (2022) → $6.71B (2023) → $5.78B (2024) → $5.57B (2025). FY2025 alone saw revenue -2.6%, operating profit -7.1%, and operating margin compress to 8.9% from 9.3%. Crucially, much of this is self-inflicted: the MD&A confirms a targeted 50% reduction in Amazon volume by June 2026 from 2024 levels (Amazon was 10.6% of revenue), plus 'revenue quality' actions that lifted revenue per piece 6.6% and pushed SMB to >30% of U.S. volume. This is management trading low-margin volume for mix — a defensible strategy, but one that has yet to stop margin erosion because Ground Saver insourcing and MD-11 grounding costs offset the planned $3.5B of network savings.

Valuation is the reason this is a hold and not a sell. At $104.86 the stock trades at 16x FY diluted EPS of $6.56 and just 0.8x sales — undemanding for a global network with 34.3% ROE. But ROE flatters a thin $16.2B equity base, and the real worry is cash returns. FY2025 free cash flow (OCF $8.45B less capex $3.69B) was roughly $4.76B, yet UPS paid $5.40B in dividends and bought back $1.0B — $6.4B returned against ~$4.76B of FCF, with long-term debt rising 12.1% to $23.6B. The ~97% earnings payout and >100% FCF payout mean the ~7% implied yield is a signal of market skepticism, not a free lunch.