United Parcel Service (UPS)
Industrial / Paquetería y logística
UPS is the largest integrated package and logistics operator in the United States, with an air and ground network spanning more than 200 countries; having completed the deliberate reduction of its largest customer's volume (Amazon) and undertaken a large-scale network reconfiguration, operating profit over the trailing twelve months is temporarily depressed by non-recurring transformation charges while the market prices in a moat that is perceived as eroding due to structural competition and e-commerce companies' in-house logistics.
- Price
- $104.41
- Intrinsic value (5y, base)
- $129
- Total annual return (5y)
- 10.2%
- Status (nominal)
- Undervalued
- Margin of safety
- +21%
The essentials
- Consolidated revenue of ~US$88.7 billion in 2025, contracting since 2022 due to the deliberate reduction of the largest customer's volume (Amazon, 10.6% of revenue) and post-pandemic normalization.
- Trailing-twelve-month EBIT is depressed by ~US$1.69 billion of Transformation Strategy charges (mainly the Driver Choice Program); excluding them, the normalized operating margin is around 9.2%, in line with the company's 2026 guidance.
- Return on invested capital of ~14.7%, above the 10% bar, but with significant leverage (total debt ~US$24.5 billion) and a dividend that has been practically frozen over the past two fiscal years.
Intrinsic value — two valuation methods
Total return at 5 years: 10.2%/year = 4.2% appreciation + 6.0% dividend. The target price ($128) is ex-dividend; the $34 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $200 · Multiples $132) exceeds the market price ($104).
Pillars of the analysis
The verdict — today vs 5 years
Today — fairly valued: at $104 trades ~21.1% below its value discounted to today (~$132); the discount is positive but does not reach the margin of safety we require (≥38%).
At 5 years — Infravalorado: the target price ($128) plus dividends yield above the required average return (10%) — the business compounds.
The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$86.
Thesis
The business
UPS operates the largest integrated package and logistics network in the United States, with operating density and scale built over more than a century that sustain a real moat but one that is now perceived as eroding: in-house logistics at large e-commerce customers — starting with Amazon — and structural competition from the postal service are reducing the sector's dependence on an integrated carrier. Return on invested capital (~14.7%) sits comfortably above the 10% bar, and the company is undergoing a deliberate pivot toward higher-margin customers — healthcare, SMBs and international — after completing the planned reduction of Amazon volume.
The valuation
The valuation uses EV/EBIT on year-0 normalized EBIT (excluding ~US$1.69 billion of Transformation Strategy charges), with a base multiple of 11× within the package delivery band (10×-14×). Undervalued at $104, with a 5-year value of $128 per share and an estimated return of +10% annually.
The margin of safety
It trades at a real discount to value, though short of the required margin of safety.. The adverse scenario assumes the network reconfiguration fails to eliminate the stranded costs left by Amazon's exit at the guided pace; the favorable scenario assumes the program concludes ahead of schedule and the normalized operating margin exceeds 12%.
What to watch
The main disconfirmer of the thesis is the execution speed of the network reconfiguration program, which does not conclude until 2027: if the guided savings (~US$3 billion in 2026) fail to materialize at the communicated pace, or if structural competition (USPS, retailers' in-house logistics) keeps eroding higher-yield volume faster than the healthcare vertical and SMB penetration can offset, the normalized margin will not converge to the level that supports the base multiple.
Educational / informational. Does not constitute investment advice.