United Parcel Service Inc. (UPS) is leaning hard into cost-cutting and getting creative with how it finances its fleet, moves that caught the attention of Wall Street analysts this week.
The delivery giant reported fourth-quarter revenue of $24.5 billion with adjusted earnings of $2.38 per share on Tuesday, handily beating the $2.20 estimate. Looking ahead to 2026, UPS projects revenue around $89.7 billion, comfortably above analyst expectations of $87.938 billion, with a non-GAAP operating margin of roughly 9.6%.
The Analyst Perspective
B of A Securities analyst Ken Hoexter bumped up his price target from $114 to $118 while sticking with a Neutral rating. The quarterly EPS number came in well above BofA's own estimate of $2.25, which certainly helped.
But here's the interesting part: Hoexter notes that seasonal patterns and hefty early-year expenses mean EBIT is expected to drop roughly 47% from Q4 to Q1, the steepest decline since 2020. That's a reminder that logistics companies deal with serious quarter-to-quarter volatility.
The Fleet Leasing Strategy
The real story is what UPS is doing with capital allocation. The company forecasts capex at just $3 billion for the year, down from $3.7 billion in 2025 and representing only 3.3% of revenue—the lowest in decades. How? By swapping 15 B767 aircraft purchases for leases instead, which saves $1.5 billion in cash. That's not pocket change.
Aggressive Cost Management
Last year, UPS slashed $3.5 billion in costs by retiring its MD11 fleet, cutting 48,000 positions, and closing 93 facilities. These moves helped offset volume losses from Amazon, USPS disruptions, and tariff headwinds. For 2026, management is planning another $3 billion in savings through 30,000 additional job cuts and 24 facility closures.
Hoexter adjusted his estimates accordingly, cutting Q1 EPS projections to $1.20 from $1.55 while keeping the full-year 2026 forecast at $7.10. He raised 2027 estimates slightly to $8.10 from $8.00 and sees 2028 EPS hitting $8.90.
Stock Performance: UPS shares were down 2.10% at $104.94 at publication time on Wednesday.
