Is UPS a Millionaire-Maker Stock? Examining the Logistics Giant's Potential
United Parcel Service (UPS), a leading global courier, has faced challenges in delivering substantial returns for investors since its IPO in 1999. Despite significant revenue growth over the years, factors like competition, macro challenges, and labor issues have impacted its performance. This article examines UPS's financial health, market position, and future prospects to determine if it can generate millionaire-making gains.
Why UPS Has Underperformed
Since its public debut on November 10, 1999, at $50 per share, UPS hasn't produced returns comparable to the broader market. A $10,000 investment at its IPO would be worth approximately $17,000 today, while the same investment in an S&P 500 index fund would have grown to over $48,000. Competition from rivals like FedEx, macroeconomic headwinds, and labor disputes have all contributed to this underperformance.
From 1999 to 2022, UPS saw impressive revenue growth, nearly quadrupling from $27.05 billion to $100.34 billion. The stock reached an all-time high of $196.24 on February 2, 2022. However, 2023 brought declines in average daily package volume, adjusted operating margin, revenue, and diluted earnings per share (EPS). These setbacks were caused by a cooling e-commerce market, inflationary pressures, and the threat of a Teamsters strike, which led some customers to switch to competitors.
UPS's Recent Financial Performance
| Metric | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Average Daily Package Volume | 24.68M | 25.25M | 24.29M | 22.29M | 22.42M |
| Average Revenue Per Piece | $10.94 | $12.32 | $13.38 | $13.62 | $13.60 |
| Total Revenue | $84.63B | $97.29B | $100.34B | $90.96B | $91.07B |
| Adjusted Operating Margin | 10.3% | 13.5% | 13.8% | 10.9% | 9.8% |
| Diluted EPS | $8.23 | $14.68 | $13.20 | $7.80 | $6.75 |
In 2024, UPS saw a rebound in daily package volume and revenue due to easing inflation, interest rate cuts, and a new labor agreement with the Teamsters. However, higher labor and pension costs, the divestment of Coyote Logistics, regulatory fines, and increased digital investments put pressure on operating margins. The first half of 2025 witnessed a further decline, with average daily package volume falling 4% year-over-year, largely due to reduced shipments from Amazon.
UPS's Strategy for Future Growth
UPS is implementing several strategies to revitalize its growth. By mid-2026, it aims to reduce its Amazon-related volumes by at least 50% while expanding higher-margin premium services. The company is also strengthening partnerships with retailers, focusing on "reverse" logistics (product returns), expanding into the biotech and healthcare markets, and growing its presence in Latin America and Asia. Leveraging artificial intelligence (AI) for route optimization and warehouse automation is also a key component of its strategy.
Analysts project that these initiatives will lead to a revenue increase of 1% in 2026 and 4% in 2027, with EPS rising 15% and 11% respectively. However, the expiration of the Teamsters deal in 2028 and increased competition from Amazon's expanding logistics network pose potential challenges.
The Verdict: Millionaire-Maker or Not?
While UPS's stock may appear undervalued, a significant increase in valuation is unlikely until its turnaround strategies yield substantial results. Even with business stabilization, achieving millionaire-maker status is doubtful. If UPS meets analyst estimates, growing EPS at a CAGR of 10% from 2027 to 2035 and trading at a more favorable 20 times earnings, its stock could quadruple over the next decade. Although this represents a solid recovery, it likely wouldn't generate life-changing returns.
Understanding UPS: Company Overview
Founded in 1907, UPS has evolved into a global logistics leader, operating in over 220 countries and territories. The company offers a wide array of services, including package delivery, freight forwarding, and supply chain management.
Competitive Advantages
- Global Reach: Extensive network for efficient global deliveries.
- Technological Innovation: Investments in advanced tracking systems and automation.
- Brand Trust: A strong brand reputation built over a century.
Risks and Challenges
- Economic Downturns: Vulnerability to reduced consumer spending during economic downturns.
- Rising Costs: Potential impact on profit margins from increasing labor and fuel costs.
- Regulatory Challenges: Operational costs may increase due to evolving regulations.
Ultimately, UPS presents a mixed picture for investors. Its solid financial performance, competitive advantages, and commitment to innovation offer potential for long-term growth. However, investors should carefully weigh the inherent risks and challenges before making any investment decisions.
