United Parcel Plunges 9.9%, What’s Fueling the Earnings-Driven Selloff?

Summary
• UPS shares nosedived 9.9% to $91.51 amid Q2 earnings that missed estimates despite $21.2B revenue
• Earnings surprise of -0.64% as adjusted EPS fell to $1.55 vs. $1.56 forecast
• CEO Carol Tomé highlighted $3.5B cost savings from reconfiguration, but withheld 2025 guidance
• Intraday range of $91.44–$98.44 reveals sharp reversal post-earnings

United Parcel’s steep decline follows a Q2 earnings report that highlighted margin compression and uncertain macroeconomic conditions. With $3.5B in expected cost savings from operational restructuring, the market is parsing whether these initiatives outweigh near-term headwinds like tariff-driven volume declines and weak consumer sentiment. The stock’s 19.5% YTD underperformance against the S&P 500 adds urgency to the sell-off.

Earnings Miss and Tariff-Induced Volume Slump Spark Panic
UPS’s adjusted EPS of $1.55 fell short of the $1.56 estimate, driven by U.S. Domestic segment revenue declining 0.8% year-over-year. Management attributed this to lower package volumes exacerbated by U.S. consumer sentiment at historic lows and the elimination of de minimis tariff exceptions. The China-to-U.S. trade lane saw a 34.8% drop in May-June, while Amazon’s shifting delivery strategies further pressured Ground Saver volumes. Despite $3.5B in projected cost savings from Network Reconfiguration and Efficiency Reimagined, the lack of 2025 guidance amid macroeconomic uncertainty triggered a sharp selloff.

Air Freight & Cargo Sector Deteriorates as FDX Slides 3%
The Air Freight & Cargo sector, led by FedEx (FDX), fell 3.04% as broader trade uncertainties weighed. UPS’s 9.9% drop outperformed the sector’s weakness but underscored shared vulnerabilities. Tariff-driven shifts in supply chains and reduced consumer spending are eroding demand across the board, with no clear recovery in sight.

Bearish Playbook: Puts at $91–$92 Strikes and ETF Caution
• 200-day MA: $114.85 (well below current price)
• RSI: 47.11 (neutral but trending downward)
• MACD: 0.425 (bullish signal) vs. signal line 0.311 (bearish divergence)
• Bollinger Bands: Price at $91.51 near lower band (97.85), suggesting oversold conditions

Key levels to watch: $90.55 (52W low) and $93 (next support). Short-term bearish bias aligns with put options at $91 and $92 strikes. For a 5% downside to $86.93:

• UPS20250808P91:
- IV: 23.77% (moderate)
- Leverage: 64.70%
- Delta: -0.4719 (high sensitivity)
- Theta: -0.13519 (rapid time decay)
- Gamma: 0.1055 (responsive to price swings)
- Turnover: 22,424 (liquid)
- Payoff: Max(0, $86.93 - $91) = $0 (strike out)
- Why: High leverage and gamma make this ideal for aggressive bearish bets, though time decay is a risk.

• UPS20250808P92:
- IV: 23.59% (moderate)
- Leverage: 47.03%
- Delta: -0.5775 (high sensitivity)
- Theta: -0.14769 (rapid decay)
- Gamma: 0.1044 (price-sensitive)
- Turnover: 50,483 (liquid)
- Payoff: Max(0, $86.93 - $92) = $0 (strike out)
- Why: Strong gamma and moderate IV make this a liquid, high-sensitivity play for a deeper selloff.

Aggressive bears should target the $92 put into a breakdown below $93.

Backtest United Parcel Stock Performance
After an intraday plunge of at least -10%, UPS has historically shown mixed short-to-medium-term performance. The backtest data indicates that while the 3-day win rate is 53.30%, the 10-day win rate is slightly higher at 56.18%, suggesting that UPS tends to recover somewhat from such large intraday declines over the very short term. However, the 30-day win rate drops to 50.25%, and the average returns over the 3, 10, and 30 days are relatively low, with a maximum return of only 0.25% over the 30 days. This suggests that while UPS may bounce back somewhat from a deep intraday dip, long-term performance remains lackluster.

Urgent Action Required: Watch the Earnings Call and 52W Low
UPS’s steep decline reflects a fragile balance between cost-cutting optimism and macroeconomic pessimism. With the stock near its 52W low and sector leader FDX down 3%, the bearish momentum is intact. Investors should prioritize monitoring the July 29 earnings call for further guidance clarity and watch for a breakdown below $93. If $90.55 is tested, pivot to defensive plays like SPY for downside protection.