UPS Earnings Loom: Why Analysts Are Bracing for a Bumpy Ride

As united parcel service (UPS) prepares to report its first-quarter 2025 results on Tuesday, investors are bracing for a challenging read. Analysts have identified a confluence of headwinds—from weakening demand to rising costs—that could test the logistics giant’s resilience. Here’s what to watch for, and why the path forward remains fraught with uncertainty.

Revenue Slump and Earnings Pressure: The Near-Term Struggle

Analysts project UPS’s Q1 revenue to decline 2.8% year-over-year to $21.1 billion, marking an improvement from last year’s 5.3% drop but still signaling ongoing weakness. The bigger concern lies in profitability. The Zacks Consensus Estimate for adjusted EPS is $1.42—a 0.7% decrease from 2024—while the “Most Accurate Estimate” from Zacks is even lower at $1.36. This 6-cent gap, combined with a negative Earnings ESP of -4.08%, suggests heightened risk of an earnings miss.

Ask Aime: Can UPS Beat Analysts' Earnings Expectations?

Volume Declines: A Structural Challenge

UPS’s outlook is clouded by a projected 8.5% drop in 2025 average daily shipping volumes compared to 2024. This decline stems from two critical factors: stagnant U.S. online sales and weakening global manufacturing activity. The pain is particularly acute in domestic U.S. package revenue, which is expected to fall 0.1% to $14.22 billion, while international shipments eke out a 0.2% gain to $4.27 billion.

Analysts warn that a major customer agreement, which will reduce volumes by over 50% by mid-2026, could further strain near-term results. “UPS is navigating a perfect storm of declining demand and structural shifts in its customer base,” noted one analyst.

Cost Pressures: Labor vs. Fuel

Labor costs continue to squeeze margins. While lower fuel expenses—down 5.1% year-over-year due to falling oil prices—offer modest relief, they’re insufficient to offset rising wage pressures. The company’s “Efficiency Reimagined” restructuring program, which involves closing up to 10% of its U.S. facilities and trimming its workforce, is expected to cost $300–400 million in 2025 alone.

Valuation Concerns: Overpriced for a Slowing Economy?

UPS’s stock has underperformed, dropping 10.9% over the past month compared to a 1.4% decline in the broader transportation sector. Analysts criticize its valuation as stretched: the company trades at a forward price-to-sales ratio of 0.96, above peers like FedEx (0.85) and GXO Logistics (0.80). The Zacks Rank #4 (Sell) reflects skepticism about its near-term trajectory.

The Bottom Line: Navigating a Rocky Road

UPS’s long-term strengths—its global network, brand equity, and $89 billion annual revenue target for 2025—are undeniable. Yet the immediate hurdles are formidable. Investors will scrutinize management’s guidance for 2025, particularly on volume recovery, cost savings, and dividend sustainability.

The company’s ability to stabilize margins amid restructuring costs and weak demand will be critical. If Q1 results disappoint, the stock could face further downward pressure, especially if peers like FedEx outperform. Conversely, a strong earnings beat or clarity on volume rebound could rekindle optimism.

For now, the market’s patience is thin. With UPS trading 25% below its 52-week high and analysts’ consensus leaning bearish, the path to recovery hinges on execution—both in operations and investor communication.

Conclusion: A Test of Resilience

UPS’s Q1 report will serve as a litmus test for its ability to weather the current storm. Analysts are right to worry: declining volumes, cost pressures, and valuation risks paint a challenging picture. Yet the company’s fundamentals remain robust, and its long-term strategy—bolstered by its $1 billion annual savings target—is sound.

Investors should look beyond the near-term noise. If UPS can demonstrate progress on restructuring, stabilize margins, and provide credible volume guidance, the stock could regain traction. But until then, caution prevails. As the earnings report approaches, the question isn’t just about Q1—it’s about whether UPS can regain its footing in a slowing global economy. The answers, when revealed, will shape its trajectory for years to come.