UPS stock fails to benefit from earnings beat as bleak macro picture takes toll

United Parcel Service (UPS) stock lost gains quickly on Tuesday after delivering an earnings beat on the top and bottom lines. After gaining 1.7% in the early going, UPS stock sold off during the earnings call that saw management express worries about the Trump administration's tariffs on China causing adverse effects to the company's future results.

Because of that, management chose not to update its prior outlook for the full year, saying there were too many uncertainties arising from the government's tariff policies to make a judgment.

The wider US stock market proved mixed at the open, with the Dow Jones Industrial Average (DJIA) outmaneuvering the other indices. But all indices cracked moderate gains later in the morning session.

UPS stock earnings news

UPS reported adjusted earnings per share (EPS) of $1.49, 11 cents above Wall Street's expectation. Likewise, revenue in Q1 saw a $480 million beat to consensus with sales totaling $21.5 billion. The revenue figure was down less than 1% YoY, and the adjusted EPS figure rose 4% from a year earlier.

UPS is in the process of exiting its partnership with Amazon (AMZN), which means less revenue but higher margins. In Q1, UPS raised its adjusted operating margin by 20 basis points to 8.2%. Management also said that it would be laying off 20,000 employees, largely due to reducing Amazon as a client.

"Consolidated operating profit, operating margin, and diluted EPS were slightly ahead of our expectations," said CEO Carol Tome on the conference call. "Our US domestic segment increased operating profit by $164 million YoY and expanded operating margin by 110 basis points."

Revenue increased 1.4% YoY in the US segment, based largely on a 4.5% gain in revenue per piece. The adjusted operating margin was 7% in the US.

For the international segment, revenue increased 2.7% alongside a 7.1% increase in average daily volume. The adjusted operating margin was 15%.

Revenue, however, declined 14.8% in UPS' Supply Chain Solutions business due to the divestment of its Coyote subsidiary.

CEO Tome said that the original 2025 guidance would remain in place if the global economy stabilized following the onset of the new US tariff regime. The company issued guidance for Q2 of $21 billion in revenue and expects an operating margin of 9.3%.

However, analysts took note of management admitting that 11% of the international segment's revenue comes from bilateral trade between the US and China. This segment would be expected to suffer under the Trump administration's 145% tariff on Chinese goods and China's 125% levy on US goods. Tome also said China accounts for the most profitable "US trade lanes."

Tome said that conversations with clients showed that many companies are letting inventories run lower than usual as they refocus their operations to deal with the new tariff regime.

Other international trade lanes to the US account for 17% of international revenue. Morgan Stanley told its clients to "fade" any rally in the UPS stock price.

UPS stock forecast

The UPS weekly chart has been looking dire long before the Q1 earnings. The UPS stock price has been trending lower since the beginning of 2022, and the share price was injured already from a seemingly expensive new union contract for drivers and the ending of its Amazon relationship.

As it stands, the next hopeful region of support comes in the wide $82 to $90 stretch. This area might be where bulls rescue the stock since it proved successful during the covid bottom in 2020. It also saw decent volumes and later lows during 2013, 2016 and 2018, so the demand region has a lot going for it.

Of course, everything in the stock market revolves around tariffs now, so UPS bulls will hope for a change of heart from the President in order to arrest its three-and-a-half-year slide.

UPS weekly stock chart