UPS stock has declined over 42% in the past three years due to difficult trading conditions, but management is focusing on cost reductions and higher-margin markets for future growth. The company aims to reduce Amazon delivery volumes and expand into healthcare, SMBs, and B2B deliveries. The long-term outlook is positive despite near-term uncertainty.

Management expected overcapacity in the small package market to clear in 2025, leading to margin expansion. However, slowing industrial economy and trade tariffs impacted higher margin activities, causing UPS to miss earnings and free cash flow guidance. Despite this, the company made progress in cutting expenses and investing in automation for future growth.

While the long-term case for UPS stock is compelling, near-term uncertainty persists due to weak B2B demand and the impact of tariffs on SMBs. The U.S. manufacturing economy has contracted, affecting UPS operations. Investors should consider the company’s strategic restructuring and cost-cutting efforts for potential earnings growth in 2026.

Investors should weigh the long-term potential against short-term challenges before buying UPS stock. The Motley Fool Stock Advisor team identified 10 stocks with high growth potential, but UPS was not on the list. Consider historical returns of other recommended stocks and join an investing community for individual investors for more insights on stock selection.

Read more at Nasdaq: UPS in 2025, and How It’s Shaping Up for 2026