March 26, 2024

UPS stock experienced a downturn just before the company’s investor day. The drop came on the heels of United Parcel Service (UPS) unveiling its upcoming strategic efforts and its financial targets for the next two years.

In the investors’ meet, UPS is set to introduce the “Network of the Future,” a strategy aimed at streamlining and automating their main integrated network to reduce costs further. The ambitious plan also includes different approaches that would enhance their market share and broaden their available market, with the ultimate aim of fuelling incremental growth.

CEO Carol Tome stated that UPS had implemented the strategy planned about three years back, transforming most facets of their operations. After a challenging year in 2023, Tome predicted resurgence and expansion in the small package sector in 2024 and the subsequent years. UPS has development-focused strategies to enter premium markets, which are expected to lead to improved productivity and efficiency.

Promising outcomes of the new strategies, according to Tome, include increased revenue, enlarged operating margins, and an enhanced free cash flow.

The revenue projection for UPS for the year 2026 is set between $108 billion and $114 billion, an increase from $90.96 billion recorded in 2023. Comparatively, FactSet analysts have anticipated UPS’s 2026 revenue to reach $101.1 billion.

In terms of operating margin, UPS’s guidance for 2026 is above 13%. For the domestic package division within the U.S., the company anticipates an operating margin of a minimum of 12%, while an operating margin between 18% and 19% is expected internationally.

By 2026, UPS also anticipates its free cash flow to be somewhere between $17 billion and $18 billion. The delivery service giant revealed that between 2024 and 2026, nearly 5.5% of the total revenue will go towards capital expenditure.

The stock of UPS experienced an 12.7% decline on the day, halting five days of consecutive gains. Meanwhile, shares rose over 3% in the premarket. The UPS stock has been on a downward trajectory since February 2022, with an overall retreat of 12.7% recorded in 2024.